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Smart city market: UK opportunities

The study explores the market structure and size, the trends in the market, and global regional highlights for smart cities. The report identifies UK strengths, barriers and opportunities, and
…

The study explores the market structure and size, the trends in the market, and global regional highlights for smart cities. The report identifies UK strengths, barriers and opportunities, and strengthening UK capability in global markets.

It makes recommendations for UK government, businesses and cities under the following themes:

Transcript

1.
1
BIS RESEARCH PAPER NO. 136
The Smart City Market:
Opportunities for the UK
OCTOBER 2013

2.
The views expressed in this report are the authors’ and do not necessarily reflect those of the
Department for Business, Innovation and Skills.
Department for Business, Innovation and Skills
1 Victoria Street
London SW1H 0ET
www.gov.uk/bis
Research paper number 136
October 2013

3.
The Department for Business
Innovation & Skills
The Smart City Market
Opportunities for the UK

11.
Smart Cities: Opportunities for the UK
i
Executive Summary
Cities have always been places of opportunity and even more so now. Recent
estimates say that 80% of global GDP is generated in cities. People are attracted
to cities to find jobs, friends, culture and enjoy the excitements of urban life. The
current megatrends of rapid urbanisation, climate change and resource depletion
need to be acknowledged and understood by cities. Cities are starting to address
the challenges of this new urban context. The C40, a network of 58 of the world’s
megacities committed to addressing climate change, reports that its member cities
have already taken 4,734 collective actions to address climate change and
economic growth.
This underlines that cities are also the sites of tremendous innovation. Cities can
be great proving grounds for technologies, providing opportunities for people to
invent new things, and opportunities to test and sell them. Cities therefore present
an opportunity for suppliers and consumers of smart technologies. Smart
technologies could help address some of the challenges of urbanisation by helping
to optimise resource consumption and improve services through better
management of demand and supply. The scale of the possible savings is
significant. A recent survey of water utilities found that utility companies could
save between $7.1 billion and $12.5 billion each year by using smart water
solutions.
Findings of the study
Our market assessment of smart solutions in five verticals: water, waste, energy,
transport and assisted living showed the following common themes:
 The market potential for smart products themselves is large and these smart
solutions provide a catalyst for further growth in traditional design and
engineering services and new services. We estimate the global market for
smart city solutions and the additional services required to deploy them to be
$408 billion by 2020. Breaking this down by vertical, in transport for example,
Pike Research estimates a global market for smart transport solutions based on
digital infrastructure to be $4.5 billion by 2018. These solutions are enabling
solutions for a wider market of $100 billion by 2018 which includes the
physical and digital infrastructure for parking management and guidance,
smart ticketing and traffic management. Also included in this $100 billion are
the traditional and new services such as heavy engineering, road design and
big data analytics which are required as a result of investment in digital smart
transport solutions.
 Benefits of smart city solutions: Smart solutions across the verticals optimise
resources through better information on where resources are being consumed.
This information enables better monitoring and management on the part of the
utility and also enables consumers to make more informed use of resources,
and lower their consumption. This in turn reduces utility operating costs and
extends the operating life of existing infrastructure. Smart technologies also
provide opportunities for new services to citizens.
 There is still confusion in the market as to the distinction between Smart city
solutions and Future city solutions. Future city solutions are innovative
physical projects which are often but not exclusively associated with low

12.
Smart Cities: Opportunities for the UK
ii
carbon economies. Smart city solutions apply digital technologies to address
social, environmental and economic goals. Smart city solutions can combine
physical and digital infrastructure or can be based on digital infrastructure
alone. This confusion is a barrier to growth of this market as confused
customers find it difficult to justify investment.
 Smart city solutions are disruptive technologies which require system wide
deployment to yield the most benefits. Existing processes will need to change.
Furthermore successful deployment will require collaboration between
multiple actors in value chain. This could be a barrier in some verticals where
there is little incentive for established players to change.
 Furthermore it is often difficult for innovative companies to deploy solutions
in the UK due to a fragmented vision of how cities can take advantage of
smart technologies and a reluctance to deploy untested but innovative products
and services. UK SMEs have told us of having to go abroad to deploy pilot
projects due to utility companies and local authorities not willing to trial their
products and technology.
 We believe that 25% of the services which make up the Smart Cities market
could be accounted for by design, research, finance, and engineering services.
Our research shows that the UK is extremely strong in these sectors and well
positioned to provide these services at home and aboard.
Opportunities for UK business and UK cities
There is great potential for UK business in this growing market. Furthermore
there are benefits to UK cities and citizens by deploying smart solutions. This in
turn would improve the chances of UK companies by opening the market here and
providing them with a platform to export their services. In the verticals,
Government needs to take a lead in removing barriers to innovation and
facilitating collaboration between multiple diverse actors. This has already begun
to happen in the Assisted Living and Transport verticals, but more needs to be
done.
There is also a need for cities and government to take a cross-sectoral approach.
Cities and government have traditionally considered these resources by verticals:
energy, water, waste, transport and health have been considered and managed
separately. Our study takes the same approach since the deployment of smart
solutions has happened largely within these vertical value chains, without much
interaction between different verticals. However cities are starting to look at smart
city solutions as part of a more integrated approach to information technology and
data. Furthermore they are looking to smart solutions and open data to address
wider economic and social challenges. This cross-sectoral approach leads to
additional opportunities for cities and citizens, and should also yield additional
opportunities for UK industry. The Future Cities Catapult and Demonstrator have
succeeded in catalysing the UK market by drawing local authorities’ attention to
the potential to use technology to address city challenges, but barriers including
funding and leadership still remain.
Recommendations for government and cities
We recommend that government considers the following areas:

13.
Smart Cities: Opportunities for the UK
iii
 The five verticals studied in this report are fundamentally material to our
society and economy, and government has an enabling role. Government
should collaborate with cities, business, and academia to help form a vision of
how cities and the five verticals will benefit from smart city solutions.
Relevant Departments and regulators in each of the five verticals should
commit to this vision and a roadmap for deployment. This would give industry
clarity on what is expected and help to address the current fragmentation of
the market. The TSB’s Future Cities Catapult will have a role in coordinating
a common vision for the sector which could be a platform for growth.
 Cities need help to develop capability in leading and facilitating collaboration
with industry, academia and citizens because deploying solutions requires
collaboration between different actors in the value chain. There is a role for
government and its agencies in convening multiple stakeholders.
 Large scale trials of whole systems should be implemented, with a focus on
business models and deployment, rather than just technology.
 Cities and utilities need to find ways to make it easier to deploy innovative
products and services. Cities should look for ways to attract capital and create
organisational structures which have the authority and capacity to deliver
innovative programmes.

14.
Smart Cities: Opportunities for the UK
Page 1
Introduction
This report was commissioned by The Department of Business Innovation and
Skills (BIS) and considers global market opportunities for UK industry in smart
city technology across five urban market verticals: energy management, water
management, transport management, waste management, and assisted living
services. The study explores the market structure and size, the trends in the
market, and global regional highlights. The UK’s strengths, barriers, and
opportunities are identified and the role of Government in strengthening UK
capability in global markets is considered, taking into account the Governments
previous and existing activity on these topics.
This report has been written in tandem with the “Global Market Smart Cities
Study - Case Studies Report” which reports on the experiences and identifies
lessons learnt from six leading cities around the world.
Methodology
This report is the result of primary and secondary research conducted by Arup.
Experts from within Arup and from across industry, academia, and non-
governmental public bodies, across all five verticals have provided input through
interview, comment and correspondence. A full list referencing contributors is
provided in Appendix A.
Estimating Market Size
The global market for smart city technology and associated products and services
is difficult to define and harder to forecast, with research organisations using
different forecasting approaches. Our research has shown that valuations of smart
technology markets can vary significantly between sources. For example in
transport, research organisation Markets and Markets predicts the smart transport
market to reach $156.3 billion in 2020, whilst Pike Research predicts a mere
$5.55 billion. Such differences in estimates arise from differences in the
technologies assessed and the scope of economic activities included by the
different organisations.
This study makes use of estimates that include the wider set of economic activities
such as design and consultancy, where possible, as these are more relevant and
appropriate for UK industry and the UK economy. Our approach in this report
considers a variety of forecasts from different sources, all of which are referenced
wherever used.
By considering a variety of forecasts we can arrive at a composite figure for the
market in 2020. Estimates forecast the smart energy technologies market
(including smart grid) reaching $220 billion worldwide by 20201
, whilst other
sources estimate smart transport to be $156 billion2
, and smart water to be $22
1
Zpryme Research, op. cit.
2
Markets and Markets Research, op. cit.

15.
Smart Cities: Opportunities for the UK
Page 2
billion3
globally by 2020. Additionally, Arup conservatively estimates both smart
waste and assisted living technology markets to reach $5 billion4
each globally.
Collectively these figures aggregate to reach an estimated annual $408 billion
worldwide by 2020.
The figures in the paragraph above represent an estimation of the total spend on
smart technology in the utility sectors examined in the report. These values
include the broader direct spend on services such as design, consultancy,
engineering and installation, which the investment in smart technologies will
bring. A breakdown of the direct spend is difficult to estimate accurately,
especially for services like design and consultancy. Market research experts like
Pike Research have noted innovation that follows the investment in smart
ventures will open new possibilities and therefore a breakdown of the different
market components in the different utilities is difficult to quantify accurately,
although some market research experts have attempted to do.
Eric Woods, Research Director with Pike Research, noted ‘The differences in
valuations in the smart transportation market and other smart city markets reflect
the difference in scope of the forecasts and also how they are related to the smart
city concept. Three key distinctions can be made:
 The total spend on ‘smart’ transportation technologies and services
 The total spend on ‘smart’ transportation relevant to cities
 The market related specifically to smart city investments’
Pike Research has based their valuation of the smart transport market on the
specific opportunity offered by the growth in smart cities (defined as the
integration of technology into a strategic approach to sustainability, citizen well-
being, and economic development). These include technologies which have been
developed to provide integrated traffic monitoring and management services,
improve congestion management, to control road user charging, enhance
emergency response, provide real times public information systems and provide
smart parking solution.
These questions aside, and taking the aggregate figure presented above of a $408
billion global market in 2020, if UK industry were to aim to take a 10% share of
the market, perhaps mostly in the UK’s traditional strengths of product design,
and infrastructure design engineering, these activities would be worth an annual
$40.8 billion to the UK economy.
3
Frost and Sullivan Research, op. cit.
4
Arup estimates based on interviews with industry experts

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Smart Cities: Opportunities for the UK
Page 3
1 Smart Energy Management
Energy systems around the world are seeing increased demand as populations rise and energy
consumption per head increases. Energy systems in developed economies are facing
increasing maintenance and upgrade costs to keep up with demand and ageing infrastructure,
whilst those in developing countries are racing to keep up with exploding energy demand.
These factors drive the need to improve energy management to drive up energy efficiency and
resilience.
Smart energy management technologies can help utilities and distributors to forecast and
manage loads better, reduce the need for costly infrastructure expansion, and improve service
quality and customer satisfaction. Meanwhile consumers benefit from service quality
reliability improvements, new tariff options, the ability to reduce their energy bills. However,
the full benefits to all parties will not accrue unless the whole energy system is made smart
end-to-end.
The opportunity for UK business is large with global market estimates such as a forecasted
$220 billion by 2020 for smart grid technology.19
However, the technology alone cannot
achieve this systemic change. Changes to the way the market operates are crucial and
leadership here would give additional opportunity for UK business internationally.
Transformational change to the current market paradigm in the UK is required to maximise
the sectors growth and potential.
UK business has a responsibility to think big and move faster to drive this transformational
change. Government has a role in convening the necessary collaboration between all aspects
of the vertical market, whilst regulators must continue to work to enable change.
1.1 Introduction
Demand for energy is increasing around the world, spurred by economic and
population growth, particularly in emerging economies. As their standard of living
and GDP has grown, countries like China, the Middle East and India in particular
have witnessed a massive growth in per capita energy use, although their energy
use is still far below that of the US.
Smart energy management technology is defined here as technology that makes use of data
or information to improve the management of energy. This is sometimes closely tied to, but is
distinct from technology which generates renewable or sustainable energy.
For this report we focus only on smart energy management technologies in the urban context.
Figure 1.1: Growth in energy use and population (1990 to 2008) and relative total energy
use (2008) Source: Arup analysis based on International Energy Agency data shows the
growth in per capita energy use versus growth in population over an eighteen year
period, as well as the total relative energy use across the globe.

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Smart Cities: Opportunities for the UK
Figure 1.1: Growth in energy use and population (1990 to 2008) and relative total energy
use (2008) Source: Arup analysis based on International Energy Agency data
This surge in energy use is expected to continue. The International Energy
Agency estimates that global energy demand will increase by over one third up to
2035, driven by improvements in living standards in the developing world; and
that the demand for electricity in emerging economies drives a 70% increase in
global demand5
. Massive investment has gone into the energy sector to try to
ensure there is adequate capacity and reliability to meet this growth in demand.
In poorer regions, however, investment is targeted at providing stable access to
electricity: an estimated 1.3 billion people still lack access to electricity.6
Meanwhile across the world, steep increases in energy prices have made energy
use a significant financial burden on households. In the UK alone, the number of
households considered to be living in fuel poverty jumped from 2 million in 2004
to almost 5 million in 2010.7
Increasing energy efficiency, promoting energy conservation and improving how
we manage energy is vital to addressing the challenges facing the energy sector.
Investment in energy management can help countries to better adjust to
fluctuations in demand, reduce the need for capacity expansion, and decrease
greenhouse gas emissions, while providing valuable savings to customers. Smart
energy management is central to this solution; it enables the benefits of energy
efficiency and improved resource management to be fully realised and promotes
the development of a flexible and resilient energy sector.
5
International Energy Agency, World Energy Outlook 2012.
6
Ibid.
7
DECC: Annual report on Fuel Poverty statistics 2012
Page 4

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Smart Cities: Opportunities for the UK
Energy Market Supply Chain
Energy markets (i.e. markets for electricity, gas, heat etc.) around the world vary
significantly in their nature. Energy sector policy, regulation and governance are
the key driver of market dynamics.
Figure 1.2 below shows a generic view of a typical energy supply chain (in
yellow). In markets which have not been fully deregulated, utilities are public or
private and tend to enjoy natural monopolies where they may be involved in both
wholesale generation, retail distribution and in some cases, transmission. In the
US for example, there are almost 3,400 electric utilities, of which about 350 are
private; however, these private utilities are responsible for 80% of generation and
75% of retail sales. Other more competitive markets feature fewer utility
companies, but the ownership of the supply chain is much more fragmented. The
UK, for example, has one of the most “deregulated” energy markets in the world,
with separate operators for transmission, distribution, supply, and retail. This
variety in market topologies makes generalisation more difficult across
geographies and this should be borne in mind when reading this chapter.
Figure 1.2: A generic energy market diagram, showing the elements of the supply chain
(yellow) and the associated smart technologies (green). Wider smart energy management
concepts are shown in blue. Source: Arup Analysis
In this chapter we consider the market for smart energy management technology
products and services. We consider the management of three forms of energy:
electricity, heating, and cooling in the urban context.
The following sub-sectors are considered and are shown in green on the diagram
in Figure 1.2 above:
 Home Energy Management Systems (HEMS)
 Smart Appliances
Page 5

19.
Smart Cities: Opportunities for the UK
Page 6
 Smart metering and Advanced Metering Infrastructure (AMI)
 Building Energy Management Systems (BEMS)
 Smart grid technology at distribution scale (including Distribution Automation
(DA) and Distribution Management Systems (DMS))
 Real-time / Dynamic pricing infrastructure
 Microgeneration management
The intended benefits of smart energy management
There are strong benefits for introducing integrated energy management systems –
from smart grids to smart meters to Home Energy Management systems (HEMs)
and smart appliances.
These include the following:
 Transmission and distribution networks benefit by being able to improve load
management and forecasting, incorporate energy storage, and by having easy
access to data to analyse, monitor and manage power quality, reliability, losses
and outages.
 Retail utilities benefit through efficiency gains in meter reading, reduction in
billing errors, reduction in service calls, theft detection and ability to provide
improved customer service.
 Customers benefit through more accurate and timely billing, new tariff
options, improved outage restoration and ability to understand and manage
energy use.
It is estimated that European households could save 10% of their consumption,
i.e. around €60 per year on average through smart meters8
. Shaspa, a European
SME, estimates that 170 billion kWh globally per year are wasted by consumers
due to a lack of power usage information9
.
The US Government estimates the cost to modernise the electricity grid is about
$165 billion, but the benefits far exceed this amount, by a factor of at least four10
.
A more recent study by EPRI estimates the costs to realise a US Smart Grid at
about $400 billion, but the benefits exceed this by an even larger factor of 4.5 11
.
Improving energy management in commercial buildings, including investment in
more advanced control systems and recommissioning buildings to ensure they are
8
Next steps for smart grids: Europe's future electricity system will save money and energy,
European Commission press summary, 12 April 2011
9
Shaspa interview March 2013
10
Modern Grid Benefits, US National Energy Technology Laboratory, August 2007
11
Estimating the Costs and Benefits of the Smart Grid, Electric Power Research Institute, 2011

20.
Smart Cities: Opportunities for the UK
functioning properly has strong return on investment, about 40% for new
buildings and 90% for older buildings, according to Pike Research12
.
However, it should be noted the full benefits may only accrue if fully integrated
systems are developed. By way of example, the full benefits of home energy
management (HEMS) tools become available to consumers once homes are
provided with real-time pricing information - HEMS tools will then be able to
make intelligent automated decisions on the cheapest moment to switch on energy
hungry devices in the home. With HEMS installed in homes, distribution network
operators (DNOs) will be able to take full advantage of distribution automation
(DA) – distribution networks could then respond to real-time changes in domestic
demand caused by the automated decision-making provided by HEMS. In
summary, real-time pricing allows HEMS to vary demand intelligently (benefiting
consumers), whilst distribution automation allows network operators to respond to
this varying demand (benefiting operators). Take away one of these technologies
and the full benefits are no longer obtainable.
Figure 1.3: Seven principal characteristics of a Modern Grid13
1.2 Drivers
The market for smart energy management products and services is primarily
motivated by the desire for efficiency, driven by economic and environmental
factors. A Frost and Sullivan study14
reports European utilities are driven most by
the demand for energy efficiency in the immediate term through to 2020, whilst
the need to improve ageing infrastructure comes to the fore in 6-10 years, from
2014 to 2020. The rising cost of energy, rising maintenance costs for ageing
infrastructure, the looming capital cost to replace end-of-life infrastructure,
12
http://www.navigantresearch.com/newsroom/commercial-building-retro-commissioning-
revenue-could-surpass-1-8-billion-in-the-united-states-by-2014
13
"A Systems View of the Modern Grid", US National Energy Technology Laboratory, 2007
14
Utility Strategies for Smart Grids in Europe, Frost and Sullivan, March 2012
Page 7

21.
Smart Cities: Opportunities for the UK
Page 8
increasing global populations and the continued rise in consumption per head, all
contribute to the need to increase efficiency in the way energy is generated,
distributed and consumed.
The principle drivers are:
 Aging infrastructure
 Energy efficiency
 Growth in renewable energy
 Need to increase resilience
Ageing infrastructure
High income countries around the world are facing a major challenge with respect
to the age and condition of their energy infrastructure. Power transmission assets
are outdated, not fit for purpose and at the end of their useful life, which is
threatening the stability and reliability of the grid. In the US for example, former
Energy Secretary Bill Richardson once declared that America was “a superpower
with a third-world grid”15
, while in the UK, a former Secretary for the Department
for Energy and Climate Change (DECC), has said the energy infrastructure in the
UK “was in such poor state that it would cost scores of billions of pounds to
overhaul”16
. This need to address ageing infrastructure is both a driver and
opportunity for improved energy management.
Increasing energy efficiency
Industrialised countries around the world have been investing heavily in energy
efficiency. Within the EU, a target has been set of 20% reduction in energy
demand by 2020. In the US, there has been strong push to promote energy
efficiency and expand decoupling in the energy sector (a policy which provides
stable revenue to utilities regardless of sales volume and encourages them to
deliver energy efficiency savings). Energy efficiency received a major boost in
the US via the 2009 American Recovery and Reinvestment Act, which directed
over $12 billion to energy efficiency initiatives.
National and city Governments in Europe, North America and East Asia are
pushing the energy efficiency agenda by:
 Enshrining energy performance standards in building codes
 Establishing agreements, emissions trading schemes, incentives and penalties
for the most energy intensive industries
 Mandating that utilities deliver energy efficiency savings
 Creating large scale public and domestic sector retrofit and energy efficiency
programmes
15
http://articles.latimes.com/2003/aug/15/opinion/ed-power15
16
www.guardian.co.uk/environment/2011/jul/12/chris-huhne-energy-market-invest

22.
Smart Cities: Opportunities for the UK
 Establishing innovative funding mechanisms to encourage investment, such as
the Green Deal in the UK
 Encouraging roll out of smart meters to build awareness of energy use
The push for energy efficiency has been driven by three key factors:
Carbon reduction
Energy efficiency is seen as one of the
most cost-effective ways to reduce
carbon emissions.
Page 9
Rising, volatile energy prices
Massive increases in energy prices,
and the volatility of these prices, pose a
significant risk that needs to be
managed or mitigated by users. In the
UK for example, the fuel price index for gas and electricity far exceeds the
general retail price index, as shown in Figure 1.4.
Figure 1.4: UK Fuel Price Index
Fuel poverty
The concept of fuel poverty is one that has gained much momentum due in large
part to rising fuel prices. In the UK, a household is considered to be in fuel
poverty if it “spends more than 10% of its income on fuel to maintain a
satisfactory heating regime”17
. Fuel poverty has ramifications that are far beyond
utility bill levels - cold homes have a negative impact on respiratory problems,
minor illnesses, and children’s educational attainment, and are linked to higher
levels of excess winter deaths. It is estimated there are 5 million homes in fuel
poverty in the UK. When comparing performance across countries, studies have
shown that fuel poverty is driven more by poor energy performance of homes
rather than high fuel prices18
.
Growth in renewable energy:
Renewable energy sources such as wind and solar produce intermittent supply
which threaten the stability and reliability of electricity networks. Grids are
designed around conventional energy generation technologies, and will need to
adapt using smart technology to support the continued growth and integration of
renewable energy in the future.
Increasing resilience
There is a need for increased resilience of our energy system in the wake of
increased environmental (extreme weather) and socioeconomic (shifting economic
contexts) uncertainty globally. Cities and utilities are driving the development of
more resilient energy systems by diversifying and decentralising their energy
17
https://www.gov.uk/government/organisations/department-of-energy-climate-change/series/fuel-
poverty-statistics
18
The Cold Man of Europe, Energy Bill Revolution and the Association for the Conservation of
Energy, March 2013.

23.
Smart Cities: Opportunities for the UK
systems, encouraging greater energy conservation and using smart grid
technology to redirect supply during outages.
1.3 Value Chain
Figure 1.5: A generic energy market diagram, showing the elements of the supply chain
(yellow) and the associated smart technologies (green). Wider smart energy management
concepts are shown in blue. Source: Arup Analysis
The structure of energy markets (electricity and gas) varies internationally. Some
countries have nationwide monopolies that operate along the whole vertical (from
generation through to retail), whilst other countries have very stratified vertical
markets with private companies operating in each stage of the market. Yet other
countries have a wide array of small regional monopolies that generate, distribute
and sell all the electricity within a specific geographic area. In some countries it is
typical for cities to own their own energy monopoly, though this is not the most
common arrangement. The diagram in Figure 1.5 shows the generic elements of an
electricity supply chain which is common to most countries.
This report focuses mostly on the urban scale as shown in Figure 1.5, ignoring the
transmission grid and generation, to focus on the distribution, supply, and
consumption in the home, commercial and industrial sectors. This report also
concentrates on the smart energy management technologies shown in green in the
diagram as these are the most relevant elements to the city context:
 Real time / dynamic pricing infrastructure
 Distribution automation (DA) / Distribution Management Systems (DMS)
 Building Energy Management Systems (BEMS) and Facilities Management
(FM) tools
 Smart metering and Advanced Metering Infrastructure (AMI)
 Microgeneration management
Page 10

25.
Smart Cities: Opportunities for the UK
Figure 1.7: An example of the convergence of different sectors around smart energy
management technologies. Source: Smart Energy Focus: AMI, Frost & Sullivan
1.4 Market size
Our research has shown that valuations for the smart energy management market
vary significantly depending on scope and definition i.e. which sectors and
technologies are accounted for. As described in the previous section, the smart
energy management market includes a wide range of technologies, products, and
services, and definitions of the market can vary widely in interpretation. Different
research experts such as Pike Research, Markets and Markets and industry bodies
such as Zpryme have published differing valuations for the sector. Additionally,
the market is moving rapidly and the technology developing continuously. As
such market estimates and forecasts from different sources are not directly
comparable and can vary significantly. It was not possible to find consistent
valuations broken down across all technology categories or regional subsectors;
however, the selected market estimates discussed below do help inform a picture
of the market.
An estimated global market size of $220 billion is forecast by 202019
for smart
grid technology globally, whilst $500 billion will be spent globally on smart grid
initiatives by 203020
. This valuation includes an estimation of the smart
technologies which will be used, the amount spent on innovation, on design
consultancy and engineering, on infrastructure development and installation, on
ICT, software and analytics and on automation and control. The report describes
Europe and North America as the “first mover markets”.
This $500 billion valuation also considers ancillary industries and services, which
will be directly influenced by the investment in smart grid solutions. These
services include traditional grid at the national (transmission) scale as well as at
the urban (distribution) scale, smart meters, demand response and home energy
management. Also included is integration of new smart technologies into legacy
19
Global Smart Grid Technology Forecast (2012-2020), December 2012, Zpryme Research
20
The Networked Grid 150, Report and Rankings 2013, GTM Research
Page 12

26.
Smart Cities: Opportunities for the UK
Page 13
systems, development and deployment of business and data analytics which will
interpret live data and better manage energy within cities.
The BRIC countries are expected to offer strong growth opportunities, as
exemplified by research from Zpryme estimating India’s smart grid market to
grow from low levels in recent years and reach $1.9 billion by 2015. China is
expected to grow to $15 billion by 2016, despite home energy management not
achieving significant penetration in China’s domestic market21
. In contrast, the
Japanese home energy management market alone is expected to reach $2.3 billion
by 2016.
The home energy management (HEMS) market worldwide is expected to reach
$85 billion by 201522
.
Looking more specifically at smart energy management products, the global
opportunity is conservatively estimated to have been $2.1 billion in 2012, and is
expected to grow by 12% annually to over $5 billion in 2020. A study by Pike
Research suggests the strongest growth regions will be Europe and Latin America
with annual growth of 21% predicted. By 2020 the two largest regional markets
will be Europe and Asia Pacific. China will be the single largest market for smart
metering. The table below shows a regional breakdown. The authors, Pike
Research, do not include services such as design, consultancy, installation, or
maintenance in their estimates and so these figures cover a narrower slice of the
wider opportunity for UK business in the smart energy management field.
Energy 2012
(million)
2015
(million)
2020
(million)
CAGR
(2012-2020)
North America 844 816 1,206 5 %
Europe 394 1,415 1,795 21 %
Asia Pacific 720 1,130 1,638 11 %
Latin America 60 130 280 21 %
Middle East & Asia 94 133 209 10 %
Total $ 2,113 $ 3,623 $ 5,127 12 %
Table 1.1: Smart energy management market estimates. Source: Pike Research Q1 2013
The valuation by Pike Research considers the investment likely to be made in
smart energy related to innovation and technologies by cities adopting a ‘smart
city’ strategy. This valuation can be described as the ‘seed’ money required to
release the much wider potential of smart energy solutions. These include the
opportunities which the development and deployment of smart technologies could
bring and the additional services and infrastructure required as a result of their
deployment.
Eric Woods, Research Director with Pike Research, noted ‘The broader
opportunities in Smart Cities could be 10 to 20 times greater than those noted (in
Smart Cities by Pike Research, 2013)’ and ‘innovation after investing in smart
21
Smart Grid Market Assessment, GTM Research
22
Home Energy Management Systems Products Market, November 2011, SBI Energy

27.
Smart Cities: Opportunities for the UK
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ventures will open new possibilities’. Eric Woods also noted that ‘The other
aspect of smart city investment to consider is that it is a catalyst for new
opportunities around technologies and services’' and that ‘these broader
opportunities would include economic benefits of investment in smart [energy] in
terms of the development of new businesses and services and the impact on local
economic performance’.
1.5 Market and Technology Trends
The smart energy management market is developing rapidly across all technology
sub-sectors (shown in Figure 1.5). This section explores the market trends for
smart energy management technologies, in the context of global patterns and
regional variations.
Smart Distribution Networks / Distribution Management Systems
In a global survey of utility executives by PennEnergy almost a third of
respondents reported already having deployed advanced distribution management
systems (DMS) in their network, with a further 40% expecting to do so within the
next two years23
. This trend is strongest in the USA – the sample of utilities
surveyed was relatively US heavy and this is also reflected in the strength of the
US in DMS rollouts (see Section 1.6).
Smart metering/AMI
Electricity meters have evolved significantly since they were first introduced as a
means of automating meter reading and improving billing accuracy. Today’s
most advanced smart meters can provide real time energy use data, power outage
detection, dynamic pricing, switching between suppliers, and a Home Area
Network interface.
Europe has led the way on AMI with a more extensive deployment than other
markets24
. Europe expects to deploy 212 million smart meters between 2011 and
202025
. European innovation in this sector is seen primarily as a result of EU
Smart Grid policy directives around energy efficiency, consumption based billing,
interoperability, standards, and climate goals.
Several companies including Itron, Landis + Gyr, Elster, GE, Trilliant, Sensus and
SilverSpring Networks have capitalised on EU compliance to offer AMI systems
with a focus on open platform protocols and interoperability.
Europe’s progress on AMI has until now mostly focused around the smart meter.
As the smart meter rollout continues and the need to process real-time information
grows the next area of focus, meter data management should be poised for
growth.
23
State of the Smart Grid 2013 Survey (infographic), PennEnergy Research, June 2012
24
Frost & Sullivan, GTM Research
25
Smart Meters in Europe, Pike Research, Q3 2012

28.
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Smart appliances
Growth in the overall domestic appliance market presents continued opportunity
for smart appliances. Sales of smart appliances are project to exceed 24 million
units by 201726
. However, smart appliance manufacturers have yet to successfully
capitalise on this apparent opportunity so far. In survey after survey27
, consumers
have shown no willingness to buy smart appliance outside their 10-year average
replacement cycle, unless they are available at the right price and deliver tangible
energy savings.
Currently though, most manufacturers are marketing the non-energy features of
their smart appliances such as grocery tools. These non-energy features have not
yet gained traction with consumers. Consumers do not currently view smart
appliances as energy and cost saving23
.
Moreover, economies of scale, better technical integration, and the emergence of
dynamic pricing are critical elements to realizing the potential of the smart
appliance market.
Microgeneration management
The market for microgeneration management technology is closely tied to the
market for microgeneration. The UK’s microgeneration stock is predicted to grow
to between 1 and 4 million units by 202028
. The UK Government published its
action plan for microgeneration in June 201129
.
BEMs
Industrial energy management systems are relatively well established and are
already tuned into real-time pricing schemes and demand response in geographies
where utilities provide this information. BEMs are similarly well established in
the commercial sector, but the technology is in the midst of rapid innovation, as
new ways of analysing, accessing and managing energy performance have
evolved. However, demand response has not yet been widely adopted in offices
and retail spaces due to the impact on occupant comfort and productivity.
The necessary adaptation of existing buildings is perceived as too costly and
complex for landlords or developers to consider. Questions also exist around how
energy management technologies fit with future workplace design and ways of
working, though they are expected to be mutually beneficial.
Other emerging trends
Cloud services: A trend that has already taken hold in other sectors, uptake of
cloud-based services amongst utilities is increasing from an almost standing start
a few years ago. Cloud-based technology services are enablers for delivery of
innovative services to both ends of the supply chain from utilities to consumers;
26
Smart Appliances, ABI Research, Q1 2012
27
Smart Appliances, Pike Research, Q3 2012
28
The Growth Potential for Microgeneration in GB, Element Energy
29
Microgeneration Strategy, DECC, June 2011

29.
Smart Cities: Opportunities for the UK
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Opower and Tendril’s cloud-based services are two such examples. The market
for cloud technology in energy management is forecast to reach $4 billion by
2020.30
Energy as a service (an embryonic trend): A newly developing market concept,
energy-as-a-service is an innovative business model for energy utilities. This
shifts energy companies from being energy providers – delivering energy to their
clients – to becoming ‘energy service providers’. Such energy service providers
would deliver packaged energy-efficient solutions to clients. For example
consumers might have heating and cooling services provided by the ‘utility
company’ rather than the consumer owning their own boiler and air-conditioner
equipment as is currently the norm. The provider might also provide and maintain
the smart appliances in the home. The consumer no longer pays for electricity or
gas, but pays for the services of heating, cooling, use of a washing machine, fridge
etc.
The concept could be one route to deliver much of the innovation presented by
smart energy proponents. A fundamental building-block is the availability of
actuarial data (i.e. reliable energy consumption profiles for different consumer
types). Actuarial data could unlock the financial services required to enable
energy-as-a-service to domestic and commercial consumers, by allowing energy
service providers correctly price their services to consumers based on accurate
models and predictions of consumer energy usage. This has already happened to
some extent in the industrial consumer sector (c.f. aggregator service companies,
also known as NOCs). The Investor Confidence Project (ICP) is a widely
supported international industry body, based in New York State. ICP is devising
standardised processes and documentation to increase investor confidence and
encouraging finance deal flow31
.
Vehicle to Grid Technologies: As smart grids are rolled out and electric vehicles
(EVs) gain uptake in the market, there is the potential to enable electric vehicles to
charge during periods of low demand and to be used as distributed electricity
storage devices. EVs could be used to feed electricity back to the system during
periods of peak demand, enabling more efficient load management.
1.6 Regional Highlights
According to Innovation Observatory’s report “Smart Grid Technology
Investment: Forecasts for 2012-2030”, the countries making the largest
investment in smart grid infrastructure up to 2030 are (in order): China, USA,
India, Japan, Russia, Germany, France, UK, Spain and Turkey. Further
information about some of these key markets is provided below.
Europe: A Smart Grids Task Force has been set up by the European Commission
to provide policy and regulatory directions for the deployment of Smart Grids,
focusing on issues such as standardisation, consumer data privacy and security.
The Grid4EU initiative brings together a consortium of six European energy
distributors to test the potential of smart grids in areas such as renewable energy
integration, electric vehicle development, grid automation, energy storage, energy
efficiency and load reduction. Under EU legislation, 80% of consumers will need
30
Cloud Solutions for a Smarter Grid, Zpryme Research, February 2013
31
ICP project website: http://www.eeperformance.org/project-allies.html

30.
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to have smart meters installed by 2020. Within Europe, Italy is the real leader -
Enel SpA has deployed smart meters to more than 30 million customers. Home
Energy Management slow to grow so far, but still promising. Smart Appliances
slow to grow, but European manufacturers in the vanguard.
USA: The US Government has been developing standards and providing
significant funding to support the development of smart grids. It has also set up a
Smart Grid Task Force to ensure awareness, coordination, knowledge sharing and
integration of the various smart grid activities of the federal Government.
Smart meters and AMI have been deployed to about 36 million customers.
California leads the way on smart meters, demand reduction and smart grid trials.
Progressive utilities such as Duke Energy, SCE, and PG&E, along with
Government stimulus and incentive packages such as ARRA have given rise to
optimisation of the hardware and software around distribution management.
Homes in the US typically do not have time-programmable thermostats; the drive
for smart energy management systems could help the US to leapfrog technology
to use much more advanced, dynamic home energy management systems.
NOCs are well established in the commercial and industrial sectors and their use
of demand response technology is growing.
India: India is ranked as the third largest market for smart grids; it is expected to
install 130 million smart meters by 202132
. Its motives for smart grid
developments are focused largely on meeting and managing future demand, which
is expected to quadruple by 2030, as well as reducing losses to the electricity
network, estimated to be about 30%33
. As a country which does not yet have full
household electricity penetration, India is poised to leapfrog technology when it
develops its smart energy networks. India is already facing severe challenges with
its grid - in July 2012 it suffered the biggest blackout in history, which cut power
to 700 million people in 28 states. The blackout has helped to galvanise support
behind India’s grid modernization programme. India has created a Smart Grid
Task Force and a Forum which has brought together leading suppliers from
around the world, such as GE, Siemens, and Schneider Electric. The Government
is carrying out pilot smart grid programmes in 8 cities. Cities have set targets for
smart meter installation, such as Bangalore which aims to have one million smart
meters installed over the next year. With its myriad of utilities, India is not an
easy market to penetrate; nonetheless, it is very open to attracting foreign partners.
The state of Maharashtra, for example, has partnered with Siemens to install smart
grid technologies.
Japan: Japan is moving rapidly following the shock to the energy market caused
by the Fukushima disaster. The energy sector is now undertaking a massive
transformation. Japan is moving away from nuclear power; all but two of the
country’s nuclear reactors are offline, and has set a target of 30% energy from
renewables by 2030. Recognising the urgent need to deploy smart grid
technology, Japan is seeking to build one of the world’s most advanced next
generation smart grids and has formed international partnership to speed the
deployment of smart meters. The Japanese Government has been promoting smart
city initiatives in four cities: Yokohama, Toyota City, Keihanna Science City and
Kitakyushu. Each of these cities is piloting innovative energy management
32
http://cmrindia.com/india-energy-vision-2015-the-future-lies-in-smart-grids
33
http://articles.timesofindia.indiatimes.com/2012-08-01/india/32979728_1_power-sector-
transmission-technical-loss

31.
Smart Cities: Opportunities for the UK
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technology and experimenting with different technical solutions that can support
sustainable lifestyles.
China: China is the world’s largest market for smart grid investments. Faced
with the need to provide energy to a growing population whose standard of living
is rapidly increasing, and under strong pressure to reduce its carbon emissions,
China is undertaking a massive programme to modernize its electricity network.
The state grid corporation of China has developed a three phased plan through
which it will invest about US$600 billion into its national transmission network,
including $100 billion for smart grid technology. Funding is being used to
develop technical standards, undertake pilots, develop smart grid management
systems, and deploy smart meters and electric vehicle charging networks. China is
seeking to leapfrog technology, and develop systems that will become the global
standard. From a market entry point of view, China has a solid advantage, the
state grid controls more than 80% of the country’s electricity supply, however, the
Chinese market has been viewed as being less open to foreign suppliers and more
focused on encouraging home-grown innovation.
Brazil: Brazil has been leading on smart grid development in Latin America, but
its commitment to smart grid development has weakened recently. Brazil has
already developed its renewable energy sources, nearly 89% of Brazil’s electricity
came from renewable sources in 201134
. According to Smart Grid News, Brazil’s
interests in smart grid development are focused more on the challenge related to
“lowered distribution tariffs, universalization, and improved power quality and
loss reduction”. The Government had previously set a target of 63 million smart
meters by 2021, but in August 2012 this was struck down by the national
electricity regulator due to high costs. Brazil now requires utility companies to
provide smart meters to new buildings or to customers who request them. This has
severely curtailed the smart energy market in Brazil, and was a severe blow to
international suppliers which had already started to invest in the Brazilian market.
Brazil is proceeding ahead with several smart city and smart grid pilot schemes,
such as the (Smart City) Búzios project.
1.7 UK Strengths, Gaps, Opportunities and Barriers
In the context of the drivers, market trends, and the global market opportunity,
this section explores the UK’s strengths, the gaps in the supply chain, the
opportunities for UK industry and the barriers to be faced.
Strengths:
The energy industry as a whole is a well-developed part of the UK economy with
a total direct contribution of £20.6 billion or 1.6% of GDP in 201135
, and the
UK’s experts in the technology, consulting, engineering, legal and financial
aspects of the energy industry are well-regarded globally. Indeed, UK power
standards are roughly aligned with the EU market and with several major
Commonwealth economies such as Singapore, Hong Kong, India and Pakistan.
This makes entry into these markets easier for UK industry and expertise. This is
particularly helpful for SMEs who would otherwise struggle with redesign costs
to enter other markets with less similar regulatory regimes.
34
Brazilian Energy Research Company, National Energy Balance Report (BEN 2012)
35
Powering the UK, Energy UK and Ernst & Young, 2011

32.
Smart Cities: Opportunities for the UK
Page 19
Energy efficiency policies and programmes: The UK has very strong policies,
programmes and incentives geared at energy efficiency in the built environment.
It is carrying out a national roll out of smart meters and is promoting large scale
energy efficiency retrofit through initiatives such as the Green Deal.
Finance sector: London’s financial sector is now a world centre for banking,
investment and venture capital. The industry will need to develop novel finance
packages to fund the innovative business models that smart energy management
will enable. The UK is already a key player in green finance, and is host to
organisations such as the Green Investment Bank, the London Energy Efficiency
Fund, the Climate Bonds Initiative, and Climate Change Capital.
World-leading skills: The UK also has internationally recognised expertise in
skills that are necessary for innovation in the market; namely, product design, user
interface design, and service design. These skills are particularly important for the
consumer-facing retail aspect of the market e.g. HEMS in the domestic
environment. Product design is a traditional strength for the UK36
especially when
tied to the UK’s solid mechanical and electrical engineering expertise. The
strengths of these product design and engineering skillsets in industry are backed
by world-leading academic institutions such as Imperial College London, the
Royal College of Art, and Central Saint Martins.
User interface design and service design are relatively new skillsets that the UK
has helped pioneer and can be most often observed in the innovative output of
East London’s startup scene. These skillsets will be fundamental to the
widespread adoption of smart energy management technology in the home and
office environments where the usability and service design aspects of products
available on the market today are not yet sufficiently refined.
UK SMEs: UK SMEs hold some dominance in the HEMS market, in global
visibility at least. Many of them offer relatively innovative products and have
developed delivery partnerships with large utilities in the UK and abroad.
Commercial Demand Response: The UK has an active market of demand
response aggregators (e.g. EnerNOC UK, and new entrant KiWi), based on
National Grid’s STOR37
programme. This gives the UK a good footing to build
upon when developing more extensive demand response services in a smart grid.
However this remains limited to relatively mid-to-large size commercial and
industrial customers.
Finally, as the coordinator of a regulated marketplace, the UK energy market
regulator Ofgem is in a strong position to override any market failures and drive
innovation in the energy market.
Gaps in the UK supply chain:
UK hardware challenges: There are relatively few UK-centred companies with
significant market positions in the sub-segments of smart meters, building energy
management (BEMS), and smart appliances. Some international firms based in
the UK have capabilities in these sub-segments.
36
The UK ranked fourth – International Design Scoreboard, 2009, IfM and Design Council
37
STOR stands for Short Term Operating Reserve

33.
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Gaps in Data Management: currently cornered by multinational IT vendors and
US-based SMEs. This may already present a barrier to new entrants. However, a
survey of European energy utilities in March 2012 reveals that almost three
quarters of respondents feel that their existing IT infrastructure is not suitable for
smart grids and is a major challenge to integration38
.
Gimmicky Smart Appliances: Product manufacturers are not yet marketing
smart appliances on their cost reduction or energy saving features. Instead they are
still marketing features that some consumers see as unnecessary gimmicks.
Surveys show consumers will not buy smart appliances until they see the potential
energy and cost benefits23
. The may also require publicity campaigns to increase
public awareness.
Opportunities:
The UK has the opportunity to develop an international competitive advantage
across many of the sub-sectors in a global smart grid market forecast to be worth
$500 billion by 203020
. The section discusses some of the key opportunities for
UK industry in the short to medium term.
Vibrant home energy management SMEs: The UK has a large number of active
SMEs in the home energy management market. These SMEs show signs of strong
innovation in comparison with international competition. They put the UK within
reach of, if not already at, the forefront of the global HEMS market.
Strong national regulator: Ofgem is in a position to enable major market
transformation to override any market failures. If Ofgem (or DECC) acts upon
this opportunity, the UK could take the lead internationally, placing UK industry
on an excellent footing to sell into other international markets.
End-to-end market leader: The UK could become the first market with an end-
to-end smart electricity grid, from transmission to distribution automation,
dynamic pricing, demand response, to home energy management, smart
appliances, commercial building and industrial energy management. This could
give UK industry an excellent skill and capability base, and a powerful platform
for marketing these internationally.
Business model innovation – ‘energy-as-a-service’: As described in Section 1.5
– Market Trends, this embryonic but innovative concept has still to be fully
defined and understood. Assuming the UK can realise its strengths as already
outlined, and forge pioneering cross-industry collaborations, this would be an
ideal opportunity for the UK to leapfrog to the very front internationally. The US
industry has begun to explore the concept of ‘energy-as-a-service’ through cross
industry bodies31
.
38
Utility Strategies for Smart Grids in Europe, Frost & Sullivan, March 2012

34.
Smart Cities: Opportunities for the UK
Page 21
Barriers and Challenges:
No incentive for demand management: Distribution Network Operators
(DNOs) typically do not see value of demand reduction since the distribution
network is not typically the pinch point. More importantly, DNOs are currently
not incentivised to promote demand response and other smart energy technologies
that may reduce energy consumption. The DNO is rewarded for transporting more
electricity, not less. In general internationally, energy utilities are rewarded for
selling more electricity, not less. Indeed, utilities responding to a recent survey
expressed fear over loss of profits due to lower energy use38
.
Lack of real time or dynamic pricing: Unless they become popular with
consumers for other usability features, smart appliances and home energy
management products will not get off the ground without real-time pricing, which
will require the wider set of smart energy technologies.
Domestic appliance oligopoly: The nature of the domestic appliance market
makes it hard for SMEs to develop their own products and services or build
retrofit products upon the established manufacturer’s products without
partnerships with manufacturers. Manufacturers are slow to move but alliances
(e.g. Energy@Home) are beginning to show signs of movement.
Integration and standards for the Smart Grid: The EC’s Joint Research Centre
has identified the integration of different technologies as the key challenge in
2013. Progress is being made on this front but utilities will become more
comfortable in making investments once integration and standards are well-
established.
Lack of strong vision: Our conversations with suppliers and has revealed a
perceived lack of the UK Government’s commitment to vision. A clearly defined
and articulated vision from Government is required to help industry invest
confidently, and increase the availability of private funds for SMEs and pilot
projects.
Regulatory constraints: General sentiment garnered during this study indicates a
potentially widely held opinion that the UK’s regulated market won’t innovate as
fast as other less regulated markets without strong directives from the regulator or
Government. This is perhaps reflected in the fact that there are few UK-centred
companies with significant market positions in many of the sub-sectors. New
initiatives like Ofgem’s RIIO 39
are a good start.
Concerns about safety and privacy: The roll out of smart meters has been met
with much scepticism and concerns over privacy, safety and health. Consumer
advocacy groups assert that smart meters emit harmful radiofrequency waves.
Concerns over privacy, how energy use data is stored, accessed, maintained and
used has sparked campaigns against the use of smart meters.
39
RIIO stands for Revenue equals Incentives plus Innovation plus Outputs

35.
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1.8 What the UK Government is doing
Several Government bodies and public organisations have been active in the topic
of smart energy management for some time. The industry has learnt much from
pilot programmes, trials, and test environments, many of which have been
delivered in partnership with DECC and Ofgem.
A number of new pilot programmes have been established recently or are
commencing imminently and will add to the knowledge and understanding within
UK industry, Government and the regulator. Crucially these pilots will go some
way in to addressing some of the barriers outlined above, such as the lack of
standards, concerns about safety, and demonstrate innovative partnerships
between industry and Ofgem. A few are listed below:
 Low Carbon London – led by UK Power Networks
 New Thames Valley Vision – a Low Carbon Networks Fund project
 Orkney Active Network Management Scheme - Smart Grid Solutions and
Scottish Hydro Electric Power Distribution
 Scottish Power Distribution
 National Grid Data Exchange
 Smart Systems and Heat Programme – Energy Technology Institute (ETI)
The UK Government, through BIS and the TSB has established the Future Cities
programme and the Future Cities Catapult (due to open in July 2013). Whilst it is
not the primary goal, smart energy management will be an integral part of the
‘future city’ outcomes these programmes will be delivering.
The Department for Energy and Climate Change (DECC), in tandem with Ofgem,
are working to address some of the investment and regulatory barriers highlighted
earlier.
 Smart Grid Forum – in partnership with industry and Ofgem, creating
consensus on the future of the network
 Smart meter roll-out completed by 2019 – putting in place a key aspect of
smart energy management
 International Smart Grid Action Network (ISGAN) – working with the EU,
sharing information and learning, with €100m funding.
 Electricity Market Reforms (EMR) – legislation allowing reform of the
electricity market. EMR contains relatively little on smart energy management
other than demand response, but could create a good background for further
reform.
 RIIO39
taking effect 2015 – the new price control framework designed to better
incentivise network operators to make the right investment choice for the
future.

36.
Smart Cities: Opportunities for the UK
Page 23
 Low Carbon Network Fund – £500m has been made available to support trials
of new smart technologies and approaches. This will then be continued by the
Innovation Stimulus under RIIO.
1.9 Recommendations
The study has shown that innovation in the UK energy market is happening in
patches but the UK’s position is waning as other countries move faster (such as
the EU, Japan, China, USA). This view has been echoed by opinion garnered
through interviews held during this study40
.
Seize the opportunity
The UK has the opportunity to develop a world-leading position by becoming the
first end-to-end smart energy market, which no other country has yet achieved.
Realising this opportunity will require ambitious disruptive transformation of the
current market model. This change to a new market model would deal with
current market failures such as non-incentivised distributors. Through close
involvement in this transformative change, UK industry could gain global
recognition as leading experts in the new energy market paradigm.
The UK has globally competitive strengths in the skills that are fundamental to the
end-to-end smartening of the energy market (engineering, service design, and user
interface design). It has expertise in financial, legal and actuarial products, as well
as an influential regulator with the power to correct market failure. These
competitive strengths give the UK the opportunity to become a world leader in
energy-as-a-service provider.
Government Leadership
Delivering such transformative change along the whole market vertical will
require a close collaborative partnership between the many actors in the full
supply chain including the regulator Ofgem and policymakers in DECC. Industry
and Ofgem already work together on specific programmes such as Low Carbon
London and the New Thames Valley Vision41
. However, such collaborations must
become deeper and more ambitious, exploring the opportunities presented by an
end-to-end smart market, and new ‘energy-as-a-service’ business models
identifying, understanding, and quantifying the tangible and intangible benefits to
consumers, producers, suppliers, and Government.
DECC can encourage this collaborative approach, but industry should have a role
in leading it. Government, through DECC, will need to set the agenda by
committing to a clear vision and articulating this widely, giving confidence to
investors, producers, distributors and consumers.
40
Interviews held during this study with industry actors (SMEs, multinationals, institutes, and
regulators). Refer to Appendix A.
41
More programmes are listed in the preceding section

37.
Smart Cities: Opportunities for the UK
Page 24
UK business has a responsibility
UK industry should take the lead on developing and driving innovation through
collaborative partnerships. For example, collaboration between SMEs and major
utilities can deliver strong benefits to both parties, and speed up innovation in the
marketplace. Industry should also take the lead in driving collaboration with
Ofgem and DECC to help reform the market.
Industry bodies should widen their collaboration to include other sectors such as
finance and investment to drive even more forward-thinking innovation, helping
to quantify and crystallise new business models. Actuarial and investment houses
should be encouraged to get involved in the reforms of the energy markets. Cross-
industry collaborations (as exemplified by ICP in the US31) should be established
to accelerate the pace of innovation.
Utilities are beginning to explore changes to the way they operate. The next step
will be to adapt to changing market models and innovative business models. UK
utilities should seize the opportunity to define new service propositions (‘energy-
as-a-service’) and retake the lead internationally.

38.
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2 Smart Water Management
The demand for water and the cost of treating water are increasing, while a reducing supply of
water means most cities are now facing huge challenges in managing and delivering safe
supplies of water to those living and working in cities. The United Nations predicts that global
water demand will rise by 40% between now and 2020 and that this will be 50% higher in
developing countries. In the UK, utility companies are experiencing losses of up to 27% of
treated water due the poor condition of the water network. Smart water management solutions
are a means by which water companies use technology to optimise performance, minimise
disruptions and conserve water.
There is growing demand for smart water management solutions from the public, who expect
utility companies to use technology to deliver better and more cost efficient service. The
global smart water market is expected to be worth over $22 billion by 2020. UK water
companies and utility companies have the ability to deliver and succeed in this challenging
and growing market if certain barriers can be addressed. The success of these solutions relies
on collaboration between multiple different stakeholders to ensure that funding models,
developing innovation, trialling of solutions and setting common strategic visions for smart
water solutions in the UK are addressed to ensure that the full benefits of smart water can be
shared by all stakeholders.
2.1 Introduction
Water is an invaluable and critical resource for a city and as such poses a number
of significant challenges for cities across the globe. In cities where drought or low
precipitation is common, water needs to be conserved and managed efficiently
and sustainably. Some cities face the opposite problem: heavy rainfall which
brings flooding that overwhelms city infrastructure, damage homes and spreads
water-borne diseases. These impacts will continue to increase with climate
change.
The challenges ahead for the water sector are considerable. Population growth,
increasing energy costs, water scarcity, climate change, water quality and the
design and management of water infrastructure are some of the complex issues
which are changing the market. The drive to provide better services at an
affordable cost is challenging. Water utilities and vested stakeholders will need to
use technological innovation to bring about much needed improvement to the
water sector. These challenges also provide opportunities to those countries and
businesses that are ready to exploit them.
Globally, utility companies which apply smart water solutions could save between
$7.1billion and $12.5 billion each year from using smart water solutions42
. These
potential savings could be achieved through the use of smarter leakage and
pressure management techniques of water networks, interpreting data which
enables strategic capital expenditure management, smarter water quality
monitoring and smarter network operations and maintenance in the water cycle.
42
Water 20/20 Bringing Smart Water Networks into Focus, SENSUS 2012

39.
Smart Cities: Opportunities for the UK
Distribution
Network
Figure 2.1: Water Value Chain Source: Arup
Figure 2.1 provides an overview of the water cycle from sourcing the water, to its
treatment, its delivery to domestic and industrial users, to its final treatment before
it is discharged back into the water course. (The agricultural sector is not shown).
Smart Water:
The context for ‘smart water’- exists within the context of the water utilities
market. The market potential for smart water solutions themselves is large but the
application of these solutions provide a catalyst for further growth in traditional
design and engineering services as well as new services. A smart water system is
one in which technology manages the distribution and management of water
resources, where advanced water treatment is present, where demand-side
efficiency is enabled and where products improve water efficiency and food
production.
There are a number of different views on what a smart water network is. Pike
Research have based their valuation of the smart water market on the specific
opportunity offered by the growth in smart cities (defined as the integration of
technology into a strategic approach to sustainability, citizen well-being, and
economic development), while Frost & Sullivan take a more holistic view of the
sector and include the basic infrastructure (pipes/valves) and design services
which will be required to be transform the network. Our definition of a smart
water network is one which offers utilities an opportunity to improve both
efficiency and customer service whilst reducing water scarcity. A smart water
network is a fully integrated system where products and systems are integrated to
enable water utilities and customers to:
 Remotely and continuously monitor and diagnose problems, to take pre-
emptive measures to manage maintenance
 Use remote sensors to optimise performance
 Comply with waste water regulation and conserve water
 Reduce supply disruptions and improve customer service
 Manage water consumption more proactively and maintain price stability
 Provide users with intelligent information which enables them to make
choices about their water usage.
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40.
Smart Cities: Opportunities for the UK
The water utilities industry and smart water utilities industry comprises of
numerous companies who provide a wide range of services and products for
collection, treatment and monitoring of water and wastewater. These are provided
and adapted for multiple purposes and end users. The water industry is highly
fragmented and at utility services level, it is highly capital-intensive.
At present the water industry lacks an adequate
holistic understanding of water supply, its use, and
how it flows. A common theme across all of the
water sector reform effort is a need for improved data
collection and the transformation of that data to
generate actionable information.
Agriculture has the largest
share of the water market
globally. In 2010, this was
estimated to be 63.4% of the
water industry's overall
volume.
Figure 2.2: Opportunities for smart technologies in the water value chain Source: Arup
Figure 2.2 provides an overview of the water cycle where smart technology could
be applied (primarily in the distribution systems) to enable a smart water network.
At present, a fully integrated smart water network does not exist in the UK or
globally. The Cleantech Group i3 define ‘Smart Water’ as technologies that use
water-related products and are integrated with IT solutions to enable automatic
detection/analysis. i2
O, a water technology company based in Southampton, is
selling an advanced pressure management solution which is recognised as the
world’s first. The system automatically optimises and remotely controlling water
pressure in your network. Water utilities from Kuala Lumpur to London have
used the pressure management solution from i2
O.
The OECD43
note that innovative techniques and business models will be needed,
to secure water-related services which will consume less water, reduce energy and
capital requirements. The OECD state that the private sector will play an
important role in this change and that public policies can go a long way to
supporting the development and diffusion of innovation.
43
Water Outlook to 2050: The OECD calls for early and strategic action. Dr. Xavier Leflaive,
OECD Environment Directorate, Paris, 2012
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41.
Smart Cities: Opportunities for the UK
Page 28
Opportunities:
Due to the presently ineffective nature of water management systems worldwide,
many experts believe that technology and smart water management are the only
real way to enable the huge reductions to the present capital and operational
running costs currently incurred by the utilities. The table below identifies areas
where smart water management could reduce cost significantly.
Utility companies could save between $7.1billion and $12.5 billion each year
from using smart water solutions42
. These potential savings would come from
changes in four key areas in the water sector.
Potential savings in the water sector
Amount Water Sector
$3,443m Leakages and pressure management – reduction in leakage levels and exact detection
of leaks, predictive modelling to estimate potential future leaks.
$4,348m Strategic Capital Expenditure – improved dynamic assessment, maintenance, and
replacement, planning and designing of network to optimise spending.
$431m Water quality monitoring – automatic water sampling, testing and quality monitoring.
$1,557m Network operations and Maintenance – Real time automated valve/pump shutoff to
facilitate flow redirection and shutoffs; more efficient and effective workflow planning
Table 2.1: Global opportunities in the water sector Source: Water 20/20 Bringing Smart
Water Networks into Focus, SENSUS, 2012
A leading international investment company, SAM, which focuses on sustainable
investments, has identified four sectors of the water industry which show potential
for growth44
:
 Distribution and management of water resources: upgrading water mains
and sewer infrastructure, developing systems for supplying freshwater and
removing wastewater, companies who act as utilities or manage water
resources
 Advanced water treatment: companies who treat and disinfect water or
provide necessary control systems and analytical instruments
 Demand-side efficiency: products and services that boost the efficiency of
water use in households or industry
 Water and food: products that improve water efficiency and reduce pollution
in crop irrigation and food production
44
SAM Study, Water: a market of the future 2010

42.
Smart Cities: Opportunities for the UK
Page 29
2.2 Drivers
Global Drivers of Change
There are numerous drivers of change in the water sector. Each driver is
influenced by geography, politics, history, climate and availability of funding. The
motivation to improve this sector is being driven by a growing public awareness
of a need to respect the environment and a desire to ensure that we can continue to
supply water in an affordable and sustainable manner.
Access to clean water and sanitation: A major global priority, enshrined in the
Millennium Development Goals, is to ensure that people living in developing and
newly industrialised countries have access to clean drinking water and adequate
sanitation. According to the UN, approximately 2.5 billion in developing
countries still lack access to improved sanitation facilities and nearly 800 million
people lack access to an improved source of drinking water. Massive investment
by multilateral and bilateral institutions is being directed to improve this situation.
Poor condition of infrastructure: Utilities are facing a massive challenge with
respect to ageing infrastructure. In the UK much of the water sector infrastructure
that has been put into place over the last hundred or so years is in poor condition
and due for replacement. Ageing infrastructure is more than a technical challenge;
it is also a financial challenge. In 2001, the US based Water Infrastructure
Network estimated that up to $1 trillion would be needed over a 20 year period to
sustain the country’s water and wastewater infrastructure45
.
In the UK, some utility companies are experiencing losses of up to 27% of treated
water46
due to the poor condition of the water networks. Water utilities globally
lose an estimated $9.6 billion on leaked water annually. Of these losses: nearly $8
billion is attributed to wasted operational expenditures on water production. More
than $1 billion spent on energy pumping are wasted. More than $600 million of
chemical costs are spent on lost water. In addition to the $9.6 billion,
approximately $2.5 billion is spent annually on leak detection efforts.
Yet due to the relatively low cost of water and significant cost to upgrade systems,
most utilities are not incentivised to address this leakage issue. Under the latest
performance regulations, half of the utilities companies operating in England and
Wales will not be required to reduce their leakages rates before 2015, despite
figures showing they have been losing more than 3.3 billion litres every day.
While annual customer bills in the UK have risen at an average of £64 to £376
since 2001, Ofwat has reported that tougher action on leaks would mean even
higher bills. Ofwat reported that 8 of 21 water companies had been set zero
reduction of leaks targets to 2014/15.
Rising operating costs: A 2012 survey by Black & Veatch47
found that the
ageing water infrastructure network, managing capital costs, financing, increasing
energy costs and expanding regulation ranked highest amongst the concerns of the
water industry.
45 Water Infrastructure Network, Clean & Safe Water for the 21st Century, A Renewed National
Commitment to Water and Wastewater Infrastructure, April 2000.
46 www.bbc.co.uk/news/uk-17622837; how much does your water company leak?
47 2012 Strategic Directions in the U.S. Water Utility Industry: A Black & Veatch Report

44.
Smart Cities: Opportunities for the UK
Drive for efficiency: Improving network efficiency, reducing energy costs have
been identified by those operating in the water industry as their main goals.
Figure 2.3: Key Goals In relation to Water Network Management Source: TaKaDu Ltd,
2012
Figure 2.3 shows survey results by TaKaDu where participants were asked, “In
your role, what are the three key challenges related to water network
management?” TaKaDu noted that almost half cited efficiency issues as the most
significant one.
Increasing demand and dwindling supply: Demand for water is soaring, and
not just to cater for the personal needs of individuals. In future, more water will be
needed to produce food for the world’s burgeoning population. The supply of
freshwater is limited; however, its demand is growing rapidly. As water becomes
scarcer, the cost of supplying water will increase. According to United Nations
projections, global water demand will rise by 40% between now and 2020 and
that this will be 50% higher in developing countries. As demand increases, utility
companies will have to find more efficient methods of managing the water
network and diversifying supply, such as through the provision of reclaimed
water. In 2007, the UN identified the UK as a country which is vulnerable to
water scarcity issues, particularly in the Southeast of England (see Figure 2.5).
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45.
Smart Cities: Opportunities for the UK
Figure 2.4: World Water Scarcity Source: Vital Water Graphics. UNEP
Figure 2.5: Water Stress in the UK - Source: Environment Agency, 2007
The State of Illinois is developing a $1bn Clean Water Initiative to be phased in over two
years using State Revolving Funds and bond sales to upgrade its water infrastructure. It is
estimated that the state of Illinois will spend $32bn over the next 20 years on their water
network
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46.
Smart Cities: Opportunities for the UK
The OECD48
estimates that demand for water will increase by 55% globally
between 2000 and 2050. The increase in demand will come from manufacturing
(+400%), electricity (+140%) and domestic use (+130%).
Figure 2.6: England & Wales Water Leakage - Source: BBC & Ofwat
Figure 2.6 shows the geographical regions in England and Wales where different
water utilities operate and the leakage levels reported in these regions in 2011.
UK Water has noted that investment at the rate allowed from 2000 to 2005 means
that it would take well over a hundred years to renew the entire network which
clarifies that the present level of investment is not sufficient to manage the ageing
network.
Climate change: Climate change is expected to cause significant variations in the
hydrological regime of many regions, culminating in droughts and water crises in
some areas. In other areas, climate change is expected to bring more intense and
frequent storms and increase the risk of flooding and sea level rise, which
combined may significantly overburden stormwater management systems.
The OECD estimates that the number of people at risk from floods is projected to
rise from 1.2 billion today to around 1.6 billion in 2050 (nearly 20% of the
world’s population). The economic value of assets at risk is expected to be around
€45 trillion by 2050, a growth of over 340% from 2010.
Increasing focus on micro pollutants: There is increased recognition that water
utilities and regulators need to address the issue of micro pollutants, such as those
from pharmaceutical and personal care products. Solutions need to be found to
meet the emerging challenges arising from new micro pollutants that are
becoming a problem in industrialised countries.
48 Water Outlook to 2050: The OECD calls for early and strategic action by Dr. Xavier Leflaive,
OECD Environment Directorate, Paris, 2012
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47.
Smart Cities: Opportunities for the UK
Page 34
Shifting water requirements: There is recognition that different uses may
require water that meets different standards, and the industry needs to be able to
match water supply quality (and quantity) to need. For instance, some commercial
customers could use reclaimed water for certain uses, while some industrial
customers may need water treated to the highest standard.
CSIRO Australia's Commonwealth Scientific and Industrial Research Organisation (CSIRO)
is a national science agency. CSIRO research is enabling the water industry’s transition
towards integrated urban water management solutions in combination with climate change
impacts. CSIRO believes that this integration has the ability to create a range of potential new
public health, environmental, economic and infrastructure management issues which will
improve the provision of services.
CSIRO research is developing and improving the utilisation of intelligent sensor network
technologies for the water services industry. Sensor networks have the ability to improve
safety, provide real-time information about water quality in drinking water and recycled water
systems and enhance predictive control of network infrastructure degradation and risk of asset
failure.
Regulatory and pricing reform: Water sector regulation is vastly different
across the world, and depends largely on the institutional structure of the sector
(for example whether utilities are operated by municipalities, quasi-independent
corporations or are fully privatised). Water pricing is a highly contentious issue
with significant socio-economic dimensions. In many parts of the world, water is
seen as a basic necessity which should be provided at a free or low cost. Tariff
regimes in which utilities only partly recover operating costs and lack capital to
invest in asset replacement and renewal or system expansion, have led to mass
underinvestment in the sector. Unlike the energy sector, tariffs generally aren’t
designed to encourage conservation through differential peak or seasonal pricing.
Water utilities are required to keep up with ever increasing regulations and
improve infrastructure; at the same time, they are restricted from passing these
costs onto consumers. As a result, some rely on the public sector to plug holes in
the financing. With recent austerity cuts, the focus is turning almost entirely to the
utilities bottom line to finance projects and innovation. This means that water
pricing models are now being examined on a whole new level in the UK.
Whole systems approach: Utilities are under pressure to take a more holistic
perspective of water, considering its whole life cycle from abstraction to
treatment, distribution, use and end treatment. This also means a stronger
recognition of the role of green infrastructure and alternative mechanisms to
manage stormwater runoff in urban areas.
Technology: The potential for service integration between utility sectors is
enabling companies operating in the water industry to examine mechanisms by
which technology and its usage can bring holistic improvements to the water
network and bring potential reductions to their operating costs.
USA – Cities using Smart Water Technology
• DC Water had a 7% revenue increase after they installed a smart metering system and their
call centre received 30% less calls.
• Leesburg, Virginia - 23% reduction in unaccounted water.
Source: Pike Research Smart Water Webinar 12th March 2013

48.
Smart Cities: Opportunities for the UK
Page 35
Drivers of Change in the UK Water Industry
Driver Trend Water Sector Opportunity
Technological Drivers
Asset Base Increased financial burden on
maintenance.
Ageing system not fully understood.
Increased pressure through population
growth and weather changes.
Improved asset management
Provision of greater resilience
to accommodate operational
extremes.
Greater resilience provided by
more integrated approaches to
the management of water.
Smart
Technology
Cheaper sensors, potential for wider
adoption and capacity within networks.
Greater ability to engage with customers
through real time interfaces.
Technology enabling operators and
providers to manage the sourcing,
treatment and supply of water in a resource
efficient and cost effective manner.
Wider adoption of real time
technologies; water and
wastewater.
Potential introduction of smart
meters.
Political Drivers
Infrastructure
cost review
Clear recommendation in the cost review
what the UK needs to reduce the economic
disruption of stop start investment cycles
Government looking to
optimise work planning cycles
in conjunction with Ofwat,
DEFRA and water utility
companies
Economic
Development
Delivering an environment that supports
economic growth
Fully integrating management
across the catchment (£ per
drop, how efficiently is the
economy using water?)
Delivering value through
creative interventions across
the water cycle (e.g. flood risk
and regeneration)
Maximising
resources
Full scale deployment of metering Collect data which can be
interpreted to promote and
develop more efficient
mechanisms of water supply
and usage
Economic Drivers
Competition Increasing “noise” around competition in
the water sector.
Liberalisation of upstream
water markets
Introduction of water trading
Funding Growing pressure on availability of public
sector funding.
M&A in water is back on the agenda
Delivering wider value on
investment
Accessing private sector
sources of funding
More efficient delivery of
capital investment

49.
Smart Cities: Opportunities for the UK
Page 36
Customers
(Value for
Money)
Inequality and an ageing and changing
population will lead to a more diverse
customer base both in terms of
demographics and in terms of their needs
and expectations. Customers will have an
increased understanding of the water cycle
Deliver operational efficiency
savings; including energy and
resources
Manage the water cycle to
deliver more sustainable
solutions
Look to join up interventions
to achieve multiple benefits,
adding value
Social Drivers
Population
Growth;
increased water
demand.
UK population likely to exceed 65m by
2018
Manage the water hierarchy,
reduce per capita demand and
manage existing resources and
catchments better
Look to local alternative
sources to supplement demand
and move water across
catchments before looking to
establish new resources.
Food and Water Increased pressure within catchments on
water resources
Linking management of land and making
space for water.
Delivering greater efficiency
within systems
Developing policy on energy
and food that is aligned to the
water cycle (e.g. links to water
foot printing)
Social
responsibility
Involvement of all water stakeholders to
help manage and control water
More inclusive solutions to
issues can be developed.
Environmental Drivers
Climate Change
Adaptation
Potential for more extreme events within
the water cycle
Increased stress on water systems
Provide resilience across the
water cycle and within water
systems
Flooding Increased impacts of river and coastal
flooding which can disable critical
infrastructure including water networks
and treatment plants
Flood risk management of
critical assets
Catchment and integrated
responses to deliver cost
efficient management of risk
Opportunity created by
management of the risk to
socio-economic development
Energy &
Carbon
Energy costs increasing
New nuclear will come on line in 2025 and
a huge rise in renewable generation is
required to meet government targets
More efficient systems for
managing the water cycle,
looking at sustainable
solutions within the wider
catchment (reduce demand).
Development of renewable
energy sources
Management of the land bank
where appropriate
Significantly reduce leakage

50.
Smart Cities: Opportunities for the UK
Page 37
Water quality Water Framework Directive looking to
deliver good ecological status through
sustainable interventions
Wider adoption of catchment
wide interventions
Ecosystem
Services
Increased recognition of the value of, and
the benefits to, the economy of ecosystem
services
Introduction of more
catchment wide responses as a
result of more transparent
valuation of the role
ecosystem services play in the
environment
Table 2.4: Drivers of Change in the UK Water Industry Source: Arup

51.
Smart Cities: Opportunities for the UK
2.3 Smart Water Value Chain
Figure 2.7: Smart Water Value Chain: Source: Arup
The illustration above provides an overview of the water cycle from water
extraction, to its initial treatment, its delivery to domestic and industrial users, to
its final treatment before it is discharged back into the water course. (The
agricultural sector is not shown). It indicates where ‘Smart Technologies’ could
be applied along the water distribution network.
Smart Water Companies, Customers & Clients
Figure 2.8: Smart Water Companies, Customers & Clients Source: Frost &
Sullivan & Arup
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52.
Smart Cities: Opportunities for the UK
Page 39
Figure 2.8 denotes various different companies which operate in the different
sectors in water industry.
Design & Engineering Companies: Develop waste strategy, policy,
environmental compliance, design and manage procurement processes. These
companies advise utilities, city councils, Governments, O&M companies, water
bodies and industry. The goals of these companies is to design and build water
networks and systems which are optimally designed, incorporate best practises to
reduce leakage and breakdowns, improve quality of life, lower emission and
increase efficiency of treatment plants. UK companies operating in this field are
highly regarded globally.
Process/Chemical/Treatment Companies: Provide products/technical and
financial feasibility studies, design of systems into project, liaise with vested
parties to ensure their products integrate into overall design, commissioning of
networks and facilities.
O&M Companies: Procure technologies for their water treatment facilities,
operate and maintain the facility, finance the facility, responsible for performance
of facility. Their products are aimed at making the water sector sustainable
through the use of more advanced technology, some of which is smart technology.
These companies will play a vital role in the development of smart water
technologies.
Water Utilities: In the UK, 34 privately-owned companies provide water,
sanitation and drainage services to 50 million household and non-household
consumers in England and Wales. These are the key buyers in the ‘smart water’
market. Water utilities will come under increasing pressure from either end of the
business spectrum, Ofwat and the businesses and public they supply to use better
technology to improve efficiencies and reduce leakage.
Industry: These are companies which required large volumes of clean water from
utility companies. These can have a huge influence on regulators and public
regarding their use of new smart technologies and best practices.
Smart Water Analytics: These are companies which provide advanced analysis
services of the water network along with information management, technology
services, and business consulting capabilities. These are the key sellers and
potentially the innovators and integrators in the ‘Smart Water’ market. The
products/systems produced by companies operating in this sector aim to optimise
water network management, improve supply and reduce leakage. These
companies are at an early stage of being able to define which data they need to
collect on the water network and how they can interpret it to develop smarter
ways of managing the water network.
Water Bodies/Regulators: These bodies govern the water sector, the bodies
whose laws have to be upheld by the water companies. The utility companies have
to report to Ofwat.

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Smart Cities: Opportunities for the UK
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2.4 Market Size
The value of the smart water market is considerable and estimated to grow at a
rate of 20% per annum between now and 2020. It is estimated that the market will
be in excess of $22.2 billion by 202049
, four times greater than its present value
This valuation of $22.2 billion includes an estimation of the smart technologies
which will be used and directly affect the rest of the water industry. The valuation
includes the amount which will be spent on innovation, on design consultancy and
engineering services, on infrastructure development and installation, software and
analytics and on automation and control to bring about smart management of the
water sector. It includes all major sub sectors of water, where smart applications
will be used to install technologies such as smart metering, development and
installation of sensors and communication equipment.
This valuation of $22.2 billion by 2020 also considers ancillary industries and
services, which will directly influenced by the investment in smart water
solutions. These services include traditional services in the water network such as
pipe network design, placement of new pipes, installation of new smart
infrastructure, development of new software services, and integration of new
technologies into legacy systems, development and deployment of data analytics
which will interpret live data on rivers and reservoirs which will enable smart
management of water within cities.
Our research has shown that the valuation of the smart water market varies
depending on what sectors and degrees of infrastructure are considered. Different
research experts such as Pike Research, Frost and Sullivan and IDC Energy
Insights have different valuations for the smart water sector, which we discuss
below.
Pike Research has based their valuation of the smart water market for cities on the
use of technologies which use a smart layer of technology. These include
technologies which have been developed to provide integrated network
monitoring and management services, improve asset management to achieve
longer design life of plant and equipment, enhance leak detection, provide real
information to utility companies on water flow in river and sewerage systems50
.
Eric Woods, Research Director with Pike Research, noted when evaluating the
transport sector that “differences in valuations in the smart transportation market
reflect the difference in scope of the forecasts and also how they are related to the
smart city concept. Three key distinctions can be made:
 The total spend on ‘smart’ transportation technologies and services
 The total spend on ‘smart’ transportation relevant to cities
 The market related specifically to smart city investments”.
49
Unearthing the REAL value of water and the Industry, Fredrick Royan, Frost & Sullivan, Nov
2012
50
Smart Cities by Pike Research, 2013

54.
Smart Cities: Opportunities for the UK
Page 41
The same logic can be applied to the ‘smart water’ industry.
The valuation by Pike Research considers the investment likely to be made in
smart water related to innovation and technologies which will be used in cities
only. Other valuators (Frost and Sullivan and IDC Energy Insights) consider the
wider aspects of the entire water network. This valuation by Pike Research can be
described as the ‘seed’ money required to release the much wider potential of
smart water solutions. These include the opportunities which the development
and deployment of smart technologies could bring and the additional services and
infrastructure required as a result of their deployment.
Pike Research - Smart City Technology Annual Revenue - Global Water: 2012-2020
Water 2012 2015 2020 CAGR
(2012-2020)
North America $351m $461m $822m 11.2%
Europe $108m $132m $239m 10.4%
Asia Pacific $16m $44m $152m 32.2%
Latin America $1m $1m $2m 8.6%
Middle East & Asia $11m $14m $31m 14.6%
Total $ 487m $ 653m $1,246m 12.5%
Table 2.5: Smart City Technology Annual Revenue - Global Water: 2012-2020 Source:
Pike Research
The Pike Research report expects major growth in Asia/Pacific. Most of this is
expected to take place in China. The high growth is due to their low starting point
in using technology and the huge scale of development anticipated in China’s Tier
2 and 3 level cities. Eric Woods, Research Director with Pike Research, noted
‘The broader opportunities in Smart Cities could be 10 to 20 times greater than
those noted in Smart Cities 2013 Research Report by Pike Research’ and
‘innovation after investing in smart ventures will open new possibilities’.
The European water utilities industry is forecast to be valued at $277.9 billion51
in
2015. At present the UK has approximately 15% to 16% share of this market. The
UK has the single largest individual market value. Based on this evaluation of the
water market and the estimations provided by Pike Research for Europe, the
application of smart technology in the water market in the UK could be worth
$21m in 2015. Pike Research have based their valuation of the smart water sector
on such technologies can help detect leaks, improve maintenance, and increase the
efficiency of water use and waste treatment.
Smart City – Application of Smart Technology Annual Projection: 2012-2020
Water 2012 2015 2020 CAGR
(2012-2020)
UK $17m $21m $38m 10.4%
Table 2.6: Smart City Technology Annual Revenue – United Kingdom: 2012-2020
51
Water Utilities in Europe, Datamonitor, 2011

55.
Smart Cities: Opportunities for the UK
Global Water Utilities Industry: The water utilities industry consists of all water that
is collected, treated and distributed to agricultural, industrial, and residential end-users. The
global water utilities industry grew by 4.9% in 2010 to reach a value of $657 billion. In 2015,
the global water utilities industry is forecast to have a value of $824.3 billion, an increase of
25.5% since 2010. Source: Global Water Utilities, Datamonitor 2010
IDC Energy Insights estimates that the worldwide utility industry for smart water
technology spending will reach $3.3 billion by 2016, experiencing a CAGR of
18.7%. IDC Energy reports that this is a significantly higher growth rate
compared with worldwide water utility IT spending, which will grow at a CAGR
of 5% during the same time period52
.
Fredrick Royan, Research Director for Global Environment (Water) Markets at
Frost & Sullivan estimated that the Smart Water Grid market was worth
$5.8Billion in 2010 and that this would quadruple by 2020 to $22.2 billion49
.
Figure 2.9: Unearthing the real value of water and the Industry - Source: Frost & Sullivan
Figure 2.9 provides a breakdown the water market into four segments, indicating
the value of Design and Engineering, Automation and Control, Smart Water
Infrastructure and ICT, Software and Analytics. Frost & Sullivan predict that
between 2010 and 2020 the Smart Water Infrastructure will be considerable larger
than any other sector and that returns in ICT, Software and Analytics with be
around 25%. Analytics, the collecting and interpreting of data (Big Data), forms
part of a market estimated to be worth $1.03bn in 2020.
52 www.smartgridobserver.com/n10-18-12-2.htm
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56.
Smart Cities: Opportunities for the UK
Figure 2.10: Unearthing the real value of water and the industry - Source: Frost &
Sullivan
Figure 2.10 breaks down the water market into five geographical regions. The
largest markets will be those in Europe and the U.S.A, while Asia and the
emerging markets in Latin America, and Africa will yield return between 15%
and 20%.
2.5 Route to Market, Market & Technology Trends
Route to Market: The route from most innovation comes from R&D. There are
some great examples of UK based companies, developing products and
capabilities and then selling them on a global market. Talking to a number of
companies which operative in the innovation sector, there was consensus that not
enough was being done by both UK government, utilities and SMEs to develop
smart water technologies in the UK.
One SME interviewed felt that regulations in the UK meant that water utilities
were conservative and risk averse. The SME noted that there were structural
regulations which mitigated against water utilities using innovative means of
managing their network. The company was able to gathered more traction, faster,
aboard than in the UK and were able to establish a presence aboard before
engaging with utility companies in the UK. Another SME noted it is easier to
grow UK innovation overseas, where there can get more support from foreign
utility companies. SMEs noted that they could not demonstrate new technologies
to a level of reliability or performance which clients demanded in the UK, which
led to clients (utility companies) being reluctant to specify them.
One leading water utility company felt that water utility companies were
incorrectly demonstrating the requirement for innovation in the water sector and
therefore did not apply to Ofwat for permission to innovate. The result of this was
a lack of funding in innovation and the development of UK based technology on
the home market.
Both SMEs and utility companies felt that the lack of testing and approval of UK
based technology meant that internationally qualified technologies were being
used in the UK market. SMEs noted that it was hard to continue funding
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operations during the lengthy testing period. This placed a huge strain on their
financial reserves of SMEs.
Adoption: The smart water technology would be considered to be in the early
adapters stage, with countries like Israel, Australia and Singapore leading the way.
Many new technologies have to be developed and installed before the any
network can be recognised as being a fully smart network.
Water utility companies have been slow to adopt new technology in the UK. This
is due to a number of issues; a lack of understanding of what benefits the
technology will bring (tangible and intangible benefits), lack of available funding;
lack of incentives being provided and no direct requirement from the Government
requiring technology to be used to improve the network.
Approximately 65% of respondents to a SENSUS survey42
cited a business case
that fails to be compelling as a ‘significant’ or ‘very significant’ barrier to
adopting smart water networks, while 74% and 62% of respondents said even
given a compelling business case, lack of funding and of political support,
respectively, would be challenges to adoption.
The water sector is one in which capital efficient investment opportunities are
increasing. The small amounts of money being invested in the water and smart
water industry demonstrates investors’ fears of entering the water utilities market.
Investing in the water sector requires a long term approach. Time is required to
design and develop concepts before carrying out small scale and then full scale
trials to prove their worth. Treatment technologies have long development cycles
and potentially large capital requirements which discourages investors.
Useable data: Water utilities want to move from billing data to actionable
knowledge. This is where water utility companies read more than that monthly or
quarterly meter readings. This actionable knowledge enables a fundamental
understanding of a customer’s usage of the utility service. This information then
allows companies to adjust their system management to provide a more efficient
service. Smart water meters are in development. Knowing what information to
collect, and how to interpret this information to maximises resources and
efficiencies is still a couple of years away from being understood
Evolution of Smart Water Value Emphasis: Global & UK
Figure 2.11: Evolution of Smart Water Value Emphasis: Global & UK, Source: Itron
The UK is perceived to be at the first stage of the implementation of smart water
technology.
Roll Out: The condition of the water infrastructure network needs to be improved
before any smart water technologies control and operate the network. The network
needs to be reduced into more manageble sections, damaged infrastruture
removed, sensors and controlled valves installed. This is occuring on a picemeal
rate at present and in most intances the upgrade works only take place after
sections of the network have failed. Having a network which is in order would
allow water utilities to upgrade infrastructure to a level which enables utilities to
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58.
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carry out analysis, and then decide on further changes to the systems so as to
enable the best returns. This has to be done on a stage by stage basis.
A smart water system will not be able to provide the stakeholders with all the
necessary information on day one. Utility companies will not have the analytical
experenice on day one to disect the data they receive. It may take up to three years
to accumulate data (a comprehensive sample set). Only then will utility companies
be able to predict and plan for opportunities to evolve and improve the network.
After the intitial instalation and subsequent collection of data, a bedding in period
would be required, (estimated to be between 3 and 5 years), utility companies
would only then able to link and integrate into other systems, which is then
considered to be a futher 5 to 10 years away. The smart water process and its
development could be compared with the development of mobile phones, where
the phones were allowed to develop as more functional mobile phones before
developing and integrating into mini computers, etc.
Investment: The total revenue in 2011-12 of the water utilities in England and
Wales was almost £10 billion. Only £12.7 million was spent by water utilities on
innovation53
. This equates to 0.13% of their revenue, which is significantly lower
than those of top R&D companies.
Yorkshire Water noted that they spend on average 0.7% of their turnover per year
on innovation and will spend £32million on innovation over the current AMP5 (5
year) period. They expect to generate returns in the order of 5:1 on this current
investment.
James Kitson, Innovation Delivery in Yorkshire Water noted that ‘Innovation has
not been the main focus of water utilities since privatisation, however, water
utilities are now recognising the value of innovation in the sector and the need to
deal with long term water issues (25years +)’ and ‘Ofwat are proactive on matters
relating to innovation, water utilities still have to present a strong business case
for their investment in innovation, before gaining approval from Ofwat’.”
UK 1,000 R&D-
performing
companies
No. of
Companies
R&D
expenditure
(£m)
Average
R&D
spend per
company
(£m)
Turnover
(£m)
R&D spend
as % of
turnover
(%)
More than £5bn 54 13,755 255 1,161,781 1
Between £500m and
£5bn
187 6,282 34 280,921 2
Between £50m and
£500m
340 3,734 11 67,828 6
Less than £50m 419 1,491 4 7,167 21
Table 2.7: The 2010 R&D Scoreboard Source: BIS, 2010, Table 7, Page 32
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Lack of Venture Capital Investment in Water: Venture capitalists have
identified business growth opportunities in the water market that seem obvious.
The water market is:
 large and expanding
 in need of innovation and increased efficiency
 deeply enmeshed with energy usage
 in urgent need of a variety of new technology approaches
However, venture capitalists are of the opinion that they can’t make sufficient
returns; due to the length of the product development and implementation, the
regulatory burden, and the market fragmentation. VC’s have identified main
players in water are large conglomerates like GE, Veolia, Siemens and realise that
these companies dominate the market. Water is a €650 billion a year industry but
it is only attracting around €105 million a year in venture capital funding
according to Global Water Intelligence. This value is growing, but venture
capitalists are reluctant to invest due to the size of the fragmented water industry
and they have found it hard to identify opportunities which offer them appropriate
economic returns. Returns by water utilities in the UK at present are in the order
of single digit percentages, which may not suit their funding requirements.
Similar to other smart and Cleantech sectors, investment in water treatment
technology requires patience. The product development stage is long and can
potentially require large amounts of capital. This makes it unattractive to venture
capitalist. Innovation in treatment technologies will continue through the
advancement of IT-based technologies that will bring further efficiencies in
existing systems.
Table 2.8: Breakdown of Smart Investment: Source: Cleantech i3
New technology in the smart water sector will need to have:
 SCADA (supervisory control and data acquisition) which will allow modern
controls and monitoring systems to interoperate with old, legacy
infrastructure.
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60.
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 To use analytics to model and to predict behaviour, where absolute
measurements aren’t possible but where probabilistic approaches can be used
(e.g. leak detection)
 Use of real time data flows and analysis to enable much more prompt reaction
(e.g. to stop pollution before its significant, etc.)
 Use of sensors to automate quality monitoring, again perhaps in real-time, to
improve operational economy.
2.6 What is happening in the market
The following countries, cities and examples referred to in this section provides
an overview of the contextual currencies which are affecting water and
development of smart water on a regional and country basis. They are intended to
highlight new and best practises around the world in smart water and water
management.
Global: A 2012 report by SENSUS42
on smart water, noted that gaining sufficient
political support was a constant issue which was inhibiting the advancements of
smart water networks globally. SENSUS noted that higher-level utility executives
(chief operating officers and chief executive officers of water utilities) should be
targeted for decision making and that key decision makers in utility companies
needed to be convinced of the potential for smart water network solutions.
SENSUS also reported that it was vital to have someone champion the cause
within organisation. To change publicly owned water utilities, political support is
required. Engagement is vital with local councils and politicians to help them
understand how investment in water infrastructure helps the entire community. In
the USA, city councils and mayors are seen as key stakeholders who need to be
influenced.
Europe: In the European Union, the Water
Framework Directive (2000/60/EC) is based on
the idea that modern water management needs to
take account of ecological, economic (including
pricing) and social functions throughout the
entire river basin. A mandate was issued to the
European Standards Organisations
(CEN/CENELEC/ETSI) in March 2009 to:
 Create European standards that will enable
the interoperability of utility meters (in
electricity, gas, water, heat)
 Permit fully integrated solutions, modular and
multi-part solutions
 Ensure that its architecture is scalable and
adaptable to future communications media
Figure 2.12: EU Countries
 Allow secure data exchange
Europe’s Water Framework Directive requires countries to pursue water charges
that reflect their costs and heavily promotes water efficiency. These policies in
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Europe have reduced interest in metering from European regulators and
governments42
.
UK: The water industry in England & Wales is divided into 10 regional Water
and Sewerage Companies and 11 Water only companies. The industry was
privatised in 1989 and the companies are now a mix of publicly listed and
privately owned. The UK water utilities industry worth $36.6 billion in 2010 and
this is expected to be worth $38.2 billion in 2015.
According to the UKTI the water industry in the UK comprises over 500
companies, employs around 80,000 people and generates over £3 billion of
overseas business each year. Moreover, it:
 Provides 18,000 million litres of water every day to 58 million people
 Has 397,401 kms of water mains and 354,066 kms of sewers
 Has around 2,250 water treatment works and 9,620 sewage treatment works
 Carries out over 2.8 million water-quality tests every year.
In their 2012 report ‘Smoothing investment cycles in the water sector’, HM
Treasury acknowledges that investment in the water industry has been cyclical
since privatisation. The report denotes that cyclical nature of investment has led to
a stop-start cycle developing within the water sector supply chain. It also leads to
uncertainty and loss of productivity in the sector potentially costing 20,000 to
40,000 jobs in the industry.
The 2011 Government White Paper, “Water for Life”54
describes the UK
government’s vision for future water management. The UK Government wants to
make the sector more resilient and make companies operating in the industry more
efficient and more customer focused through the better use of information
technologies. The report denotes the importance of smart water metering and
recommends that Ofwat establish a group to advise on the costs and benefits of
intelligent metering. It also makes reference to possible synergies with the roll out
of smart energy meters and notes the potential benefits which the use of smart
water metering could bring by making the water system better managed and more
sustainable.
Ofwat report that at present around 40% domestic properties in England and
Wales are metered. Water companies in parts of the country which the
Environment Agency has classed as ‘water stressed’ (refer to Figure 04),
penetration is expected to reach at least 80% for most companies by 2020 and
90% by 2030.
54
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Government’s Water White Paper and its impact on water companies:
The White Paper is intended to advance Defra’s commitment to reforming the
water industry; to enhance competition, improve conservation and to protect
poorer households. The White Paper focuses on:
 Reforming the water industry to be innovative, efficient and customer focused
 Increasing the resilience of water supplies to future pressures such as climate
change
 Ensuring bills are affordable in the future
 Considering the introduction of universal smart metering
 Reducing water wastage through leakage management
 Encouraging more responsible use of water - this needs to be developed
through Building Control and further education of end users.
Responsibilities for Water Regulation:
 Ofwat introduced the Overall Performance Assessment (OPA) in 1999 to
provide a comparative overview of company performance. In England and
Wales activity in the sector is currently driven by the Ofwat five-year periodic
reviews. Ofwat agrees an Asset Management Plan (AMP) with each of the
water utility companies. This sets the price limits that consumers can be
charged based on the costs of delivering the company’s business objectives.
AMP5 covers the period 2010 to 2015 and has established capital and
operational expenditure across the sector of approximately £5bn per year for
the period.
 The Department for Environment, Food and Rural Affairs (DEFRA) manages
all aspects of water policy in England, including water supply and resources,
and the regulatory systems for the water environment and the water industry.
 Environment Agency has responsibility for regulation of industrial pollution
controls and is charged with preventing deterioration of water quality, seeking
its improvement.
 The Drinking Water Inspectorate has responsibility to ensure that water
utilities fulfil their statutory requirements for supply of wholesome drinking
water.
North America: The water utilities industry in the United States was worth $156
billion in 2010 and this is expected to be worth $202 billion in 201555
. SENSUS
reported that the existing regulations in the USA were not adequate for reporting
and provide little incentive for water utility companies to adopt smart water
technologies42
. Water utility companies referenced the Energy Act of 2005, which
instigated the development of the electrical smart grid in the U.S, and that a
similar approach in the water sector may prove productive.
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SENSUS noted that there is a lack of regulatory support for smart water networks
and gaining political support to develop this market is required. Regulators are not
in a position to either make key decisions or influence decision makers in relation
to smart water. Utility companies in the USA have noted that regulatory support
and incentives are critical to kick-start smart water management.
China: The Chinese water utilities industry was worth $49.3 billion in 2010 and
this is expected to be worth $58.6 billion in 201556
. In comparison the UK water
utilities industry worth $36.6 billion in 2010 and this is expected to be worth
$38.2 billion in 2015. In Asia huge growth is anticipated in the smart water sector
and in particular China. The high growth is due to their low starting point in using
technology and the huge scale of development anticipated in China’s tier 2 and 3
level cities. China has recently focused its attention on improving drinking water
standards and wastewater treatment. In 2006, China’s drinking water regulation
was updated to those of the EU. Meeting these standards, however requires
significant investment in Chinese water infrastructure, including upgrades to
advanced water treatment technologies and rehabilitation of the water distribution
network42
.
In 2011, a UKTI Water Sector Report on noted that the water market in China is
big and demand is increasing year on year. Foreign investment in municipal
utilities has been encouraged in order to improve efficiencies and reduce cost to
local communities. UKTI advises companies to research the Chinese market and
supply chain fully before entering. UKTI also advise UK companies on getting
legal and financial advice before undertaking work in the country57
.
Only 70% of Chinese cities have wastewater treatment facilities. Many of its
counties and towns are without sanitation services. As a result, 70% of China’s
lakes and rivers do not meet safety standards for human use. China’s expanding
urban demographics require modern sanitation services and access to drinking
water: a challenge when 35% of untreated wastewater is discharged into drinking
water sources.
Singapore: The Singaporean water utilities industry was worth $400.7 million in
2010 and this is expected to be worth $406.4 million in 201558
. Singapore has no
natural aquifers or huge land mass to collect water and have been working on
having a sustainable approach to water since their separation from Malaysia in
1965. Singapore’s water challengers are being solved through the use of
technology and integration of services. Singapore has been referenced as a model
city for water management.
PUB - Singapore’s National Water Authority
PUB (Public Utilities Board), has 158 water level sensors located around Singapore for
monitoring of the drainage system. These water sensors provide data on water levels in drains
and canals, which enable PUB operatives to forecast capabilities and potential response time
for flash flooding. Using a number of different initiatives Singapore has been able to better
manage its water network:
NEWater: High-grade reclaimed water is produced from treated used water which is further
56 Water Utilities in China, Datamonitor, 2011
57 Water Sector Report China, UKTI, 2011
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purified using advanced membrane technologies and ultra-violet disinfection. NEWater meets
30% of the nation’s water needs.
Desalinated Water: Singapore has one of Asia’s largest seawater reverse-osmosis plants,
accounting for 10% of Singapore’s water needs.
Reservoir in the City: Singapore has been creating reservoirs. The Marina Reservoir was
formed in 2008 from the damming of the mouth of the Kallang Basin. These reservoirs have
often formed part of greater developments which have helped develop the city state, such as
the Marina Bay Sands Resort and Gardens by the Bay. In the case of the Marina Reservoir, it
provides added protection against tidal flooding
Used Water Superhighway: Singapore has a network of tunnels to take wastewater from the
northern and eastern parts of the city state to a centralised treatment plant where it undergoes
NEWater treatment. The tunnel network is 48km long.
Israel: Israel's water demand outstrips their available conventional water
resources. Rain falls only in the winter, predominantly in the northern half of the
country. Irrigation and water engineering are seen as integral to the country's
economic survival. A long drought between 1998 and 2002 led the Israeli
government to build large-scale seawater desalination plants. Israel relies heavily
on unconventional water resources, such as reclaimed water and desalination.
The Israeli government acknowledges that the country resides in an area suffering
from a shortage of water. Israeli has managed, in collaboration with the private
sector, to make full use of its limited water resources to develop a growing
environment which compares to water-rich countries.
The development of their desalination program, the development of polices which
promote and encourage the new of technology in the water sector, have led to
Israel becoming a recognised world leader in water technology in a very short
period of time.
Mekorot
Mekorot is Israel’s national water company. It supplies Israel with 90% of its drinking water
and operates the national water supply network known as the National Water Carrier.
During the 00’s, Israel faced a growing challenge of managing its own water supply.
Increasing demand, decreasing supply and growing energy costs were seen as challenges
which the water network had to overcome in Israel. With the backing of the state government,
Mekorot founded WaTech. Mekorot hoped that through developing technology and innovation
in the water industry, WaTech would enable it to overcome Israel’s water issues. Watech
provides funding to help develop start-up companies in the water industry which nurtures
innovation. Since founding WaTech in 2005, Israel has rapidly established itself as a world
leader in water technology and innovation, exporting its technology and engineering services
to numerous countries around the globe.
Mekorot has benefited from the establishment of Watech. Mekorot receives reduction on the
costs of buying the developed technology developed through Watech supported companies.
Mekorot also receives royalties, referral commissions and options from work carried out by
Watech supported funds. Mekorot, WaTech and its subsidiaries have partnered with numerous
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Brazil: The Brazilian water utilities industry was worth $26.9 billion in 2010 and
this is expected to be worth $46.5 billion, in 201559
. A 2011 report by UKTI60
reported that increased government funding and changes in policy by the
Brazilian Government in the water industry has encouraged companies in Brazil’s
water and sanitation sector to look at partnering opportunities on applicable
technologies and products as a way of bringing in technology whilst minimising
risk and capital investment.
The report also noted a perception of a knowledge and technology gap for sewage
treatment in Brazil. The report concluded that there are three aspects of the water
industry which need to be addressed in Brazil:
 Better planning and co-ordination
 Identification of appropriate projects for investment
 Ensuring that the re-engineering is appropriate and effective
Brazilian – Water Sector (UKTI Report)
Industry Size £2 billion p/a & 100 organisations
Industry Structure State and large private organisations concentrated
Growth (5-year trends - output
& investment)
15 to 20% per year
Short to medium term outlook Very healthy for the supply chain
Main strengths Strengthening legislation, policy and CSR
Gaps identified Technology, skills, equipment, capacity to deliver
Table 2.9: Brazilian Water Sector Source: UKTI
On 05/03/2013, Brazil’s President, Dilma Rousseff stated that Brazil would invest
US$12.1 billion in waterworks projects to expand the potable water supply in the
Northeast region. The Brazilian Government is keen to attract investment in PPPs
and sees this as a stimulus to the country achieving the infrastructure development
needed over the next two decades. Brazil’s legal framework for Brazilian PPPs
provides opportunities for UK environment and water companies and their
professional advisers and lenders.
However, UKTI noted that some caution is still required since:
 Government officials need to be educated on the financing, management and
operation of PPPs
 The legal system in Brazil is laborious and extremely slow.
 Standardising of legal documents is required.
59
Water Utilities in Brazil, Datamonitor, 2011
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Australia: The Australian water utilities industry was worth $10.8 billion in 2010
and this is expected to be worth $16.7 billion in 201561
. In comparison the UK
water utilities industry worth $36.6 billion in 2010 and this is expected to be
worth $38.2 billion in 2015. Agriculture is the largest segment of the water
utilities industry in Australia, accounting for 75.2% of the industry's total volume.
Australia is the Earth's driest inhabited continent where droughts are common,
along with water shortages and resulting water restrictions. The Australian
Government's Water Smart Australia Program has provided $1.5 AUD billion
(£1billion) to fast track the development and uptake of smart technologies and
practices in water use across Australia. The program also assists to advance the
implementation of the National Water Initiative which is Australia's blueprint for
national water reform.
The Australian water utilities industry is dominated by public-sector corporations,
whose revenue streams may include state subsidies. For private-sector players, it
is not possible to compete directly for end-user customers; instead, companies
must usually bid for contracts to supply all customers within a geographical
region.
FCubed
FCubed are an Australian company that have developed ‘Carocell’, a solar desalinating /
purification technology which is extremely efficient and cost effective. Carocell solar
desalination technology produces pure, clean drinking water on any scale from any water
source. Carocell direct solar desalination technology emits no greenhouse gas emissions, uses
no chemicals, no costly membranes, no filters, no electronics and no ongoing power source is
required other than solar radiation. Carocell has been independently tested by ARUP who
found Carocell to be almost twice as solar efficient as comparable products. When combined
with ZLD, Carocell is also significantly cheaper than commonly used reverse osmosis
technology. Source:Arup
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2.7 UK Strengths, Gaps, Opportunities and Barriers
Strengths:
The water industry is extensive and the UK has numerous experts in technology,
consulting, engineering, legal and financial sector. These companies work on
international projects providing products and services to deliver these important
projects. Listed below are some of the sectors in which UK firms are able to offer
their services:
UK Capability and Strengths in the water industry
Regulation Finance Public Private Partnerships
Business Structure Operations Development and construction financing
Regulatory advisory work Privatisation Advice Feasibility Studies
Manufacture/Construction Design Services Dispute resolution
Competition R&D Mergers and Acquisitions
Table 2.10: UK Capability and Strengths in water
Gaps in UK supply chain:
UK based SMEs and utility companies spoken to noted that there was sufficient
technology in the marketplace to enable a smart water network to become
operational. However, these companies noted that there were a number of barriers
which were preventing this from taking place
 Lack of Research and Development: There appears to be no direct
progression for the outcomes of R&D in the UK. SMEs noted that they have
to go abroad in order to further their business. SMEs noted that this slowed
down their development significantly. A number of leading UK academic
institutions (Universities of Cranfield Sheffield, Bradford, Imperial College
London, Newcastle and Exeter) are endeavouring to develop technology to
ensure that the UK is at the forefront of new water technology developments.
 The existing water networks do not provide sufficient information/data to
enable utility companies to manage networks effectively.
 There are no British Standards specified for the development and deployment
of smart water solutions.
 SMEs and utility companies spoken to noted that there was a lack of
innovation in the water sector in the UK. Utility companies are slow to both
SMEs and innovative technology on board.
 Funding – Utility companies have to comply with Ofwat regulations which
run in five year cycles. This regime does not enable utility companies to invest
in new innovation during an AMP which has not been approved for that AMP
period.
 UK SMEs don’t have direct access to financing. Furthermore, proposals by
SMEs don’t often adequately explain the proposal, risk and/or rewards to
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68.
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 Risk & Reward – The utility companies are regarded by some interviewees as
being very slow to take on risk. This has been apportioned to the regulations
imposed by Ofwat and the ‘Old School’ mentality which dates back to when
the water utilities were in public hands.
 The UK is lacking tier one manufacturing capability (UK suppliers are not
ready to supply parts in the development of new technology). From a product
development perspective, this means that most of the equipment and
technology required will not be manufactured in the UK. Smart meters are not
made in the UK.
 Knowledge gap. Even with the introduction of smart metering, it will take
utility companies time to ensure they are collecting the correct information
before being able to interpret the information to manage the network for
effectively. Analytics, the collecting and interpreting of data (Big Data) is still
a couple of years away.
Opportunities:
Due to the presently ineffective nature of water management systems worldwide,
many experts believe that technology and smart water management are the only
real way to enable the huge reductions to the present capital and operational
running costs currently incurred by the utilities. The table below identifies areas
where smart water management could reduce cost significantly.
Smart Water – Identification of Global Opportunities to improve performance of Utilities
Companies - Potential savings in the water sector
Amount Water Sector
$3,443m Leakages and pressure management – reduction in leakage levels and exact detection
of leaks, predictive modelling to estimate potential future leaks.
$4,348m Strategic Capital Expenditure – improved dynamic assessment, maintenance, and
replacement, planning and designing of network to optimise spending.
$431m Water quality monitoring – automatic water sampling, testing and quality monitoring.
$1,557m Network operations and Maintenance – Real time automated valve/pump shutoff to
facilitate flow redirection and shutoffs; more efficient and effective workflow planning
Total = $9.8bn
Table 2.11: Smart Water – Identification of Global Opportunities to improve performance
of Utilities Companies Source: SENSUS 2012
The table above gives a breakdown of the potential savings which smart
technology could bring the water sector globally. In order to achieve these
savings, water utilities will have to invest in technology being developed by many
SMEs operating in the water sector.
 The design services provided by UK consultancy are highly regarded globally.
Opportunity exists for this field in the form of further trade missions by the
Government and UKTI, which may help grow the national industry by
unlocking new customers in developing regions across Africa, Latin America
and Asia.
 Opportunities exist for wider distribution of income generated from the release
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Barriers:
For a smart network to become operational in the UK, a number of substantial
barriers such as the fragmentation of the sector, slow adoption of new
technologies, no holistic vision being set out for the sector, and lack of SME
development needs to be overcome. An overview of the barriers in place
hindering UK firms developing in this sector is provided below:
 Testing – SMEs are required to carry out full scale testing for each utility in
order to get approved. This costs significant time and money.
 SMEs have a lack of access to funding which will allow them to bring their
product to full scale development.
 The public have not been convinced by the utility companies as to the merits
of Smart Water
 Technology and utility companies have not developed full business plans
which demonstrate the true cost of smart water technology and who will reap
the rewards. The initial costs of deployment and determining payback period
need to be developed and explained.
 The fear of change by Governments, utilities and consumers in relation to the
adoption of technology on a large scale needs to be overcome.
 There is no strategic, holistic vision set out by the UK Government for smart
water solutions. This results in SMEs, utility companies, regulators and
customers having different perspectives of what smart water is, and what it
should offer cities. This lack of vision also acts to constrain legacy
investments.
 Companies spoken to note that the water utility sector lacks a holistic view of
the water industry, therefore they are reluctant to change what they don’t
know about and that there was a lack of understanding of how the network
should look like in future by all.
 The utility companies and analyst companies don’t have the correct level of
data to make the water system fully smart. If metering was introduced they
could have too much data being and not knowing what to analyse. Knowing
what data to look for and interpret will take time, possibly 3 to 5 years after its
installation.
 There is political pressure applied to Ofwat and the utilities companies to keep
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89
65
62
53
50
Business Case for investment in
complelling, but there is a lack of funding
Business Case for investment in smart
water technologies and/or services is…
Business case for investment is
compelling, but there is a lack of…
Interest exist but technology/services
does not exist
Not aware of potential solution
Table 2.12: Barriers to Smart Water Network adoption. Source: SENSUS 2012
The chart shows the factors which prevent companies from adopting smart water
technologies. It is based on a study of 182 respondents who answered ‘very
significant’ or ‘significant’ Total N=182 in a SENSUS report in 2012
2.8 What the UK Government is doing
In the recent White Paper ‘Water for Life’ by HM Government, the privatisation
of water in the UK has been described as a success storey. Water utilities
companies have spent vast sums of money, which the Government otherwise
would have had to have spent. However the level of improvement presently
required in the industry is huge. Since privatisation, the UK government have
allowed Ofwat and the utility companies to handle water related issues. Industry
expert have acknowledged that this is now hindering the development of the
industry. The 2012 Draft Water Bill takes forward the proposal set out in the 2011
White Paper.
The UK Government have not been proactive in the industry; they have not been
setting goals or visions for the utility companies to deliver. The Government’s
lack of involvement has damaged the industry. The water industry is fragmented
and has no cohesive voice. There are five water bodies which claim to act for the
water industry.
The Government has recently published it ‘The Market Reform Programme’ for
water. It was developed to support delivery of the UK Government’s vision for
the future of water management in England, as it was described in the Water
White Paper. The Government want to develop a resilient water sector, where
companies are more efficient and customer focused, and one in which water is
appropriately valued. The Governments wants to improve the range and quality of
services offered to customers by fostering innovation and efficiency, and
encouraging new businesses to enter the market.
There are some projects which are government funded and work across different
parties in the industry:
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TSB: Water: Innovation Opportunities for the UK
The TSB noted that conditions in 201162
did not warrant an innovation platform
investment in water; however they did find other opportunities for the water
industry. The TSB noted that the UK has many world class consultants,
contractors and manufacturers who are already operating in the market and have
the potential to expand and develop.
The biggest opportunities lie overseas. The UK has a vibrant water sector,
including many world class consultants, contractors and manufacturers who are
already serving this market and whom we think have the capacity to grow further.
The TSB noted that challenges and opportunities arose around the following
areas:
 Flooding
 Water scarcity
 Water quality
 Water sector energy consumption and greenhouse gas emissions
Government Backed Projects
In November, 2012, The Technology Strategy Board (TSB), The Department for
Environment and Rural Affairs (DEFRA), The Natural Environment Research
Council (NERC) and The Engineering and Physical Sciences Research Council
(EPSRC) provided funding to seven projects which will examine challenges in
water security in the UK and overseas. £2.5 million of funding from the agencies
combined with £3.1m from contributing companies will be used for research,
technology innovations and an examination of how the participating companies
can explore/expand/exploit opportunities in the UK and overseas. The companies
involved have been set the challenge of creating a technology or process that will
either save or recycle 1,000 million litres per day worth of water.
The Engineering and Physical Sciences Research Council (EPSRC) is providing
£240,685 of funding to the University of Birmingham’s Civil Engineering
Department on a project for Smart Leak Detection Pipes. This project involves
developing a leak detection system for existing and new water pipes which is easy
to install.
Industrial Doctorate Centre: Skills Technology, Research, and Management
(STREAM) for the UK Water Sector
The EPSRC’s Industrial Doctorate Centre programme is a mechanism by which
the EPSRC aims to plug the shortfall in advanced engineering skills within the
water sector. The programme involves training engineering leaders to have a
combination of business, engineering and academic knowledge. The proposal
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combines together five of the UK's leading water research and training groups
with the aim of securing the future supply of advanced engineering professionals
in the water sector which of vital importance to the UK.
Led by the Centre for Water Science at Cranfield University, the consortium also
draws on expertise from the Universities of Sheffield and Bradford, Imperial
College London, Newcastle University, and the University of Exeter.
STREAM Project Partners:
Anglian Water Services Ltd British Water International Water Association
JBA Consulting Mouchel Group MWH UK Ltd
Northumbrian Water Ltd Severn Trent Water Ltd South West Water Ltd
Thames Water Utilities
Limited
Trojan Technologies UK Water Industry Research Ltd
United Utilities Water Ltd W R C Plc Yorkshire Water
Starts: 01 October 2009 Ends: 31 March 2018 Value: £6,423,636
Table 2.13: STREAM Project Partners
2.9 Recommendations
2.9.1 What the UK government could do better
Follow through on previous recommendations
Many of the barriers and challenges the sector faces have previously been
identified and recommendations have already put forward in previous papers by
government. Government should ensure that the recommendations of ‘Smoothing
investment cycles in the water sector’ by HM Treasury and the 2011 Government
White Paper, “Water for Life” and the 2012 Draft Water Bill are fully
implemented.
Leadership and Collaboration on standards and vision
National government (e.g. DEFRA) should set clear goals and visions for the
future of the water market and the use of smart water technologies in the UK. BSI
should be tasked with developing national standards for smart water solutions to
provide a consistent definition and understanding within the industry. The vision
and standards should be informed by the opinion of key stakeholders in the water
industry.
Vested parties with different goals need to come together, to deliver one aligned
vision. DEFRA and Ofwat can play a key role in driving this multi-party
conversation and collaboration. It is essential that this vision is clearly
communicated to the industry and the general public, once developed, to give
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Encourage and Drive Innovation through collaboration, regulation and open
data
Ofwat should develop ways to encourage innovation in the water market.
Yorkshire Water has been able to demonstrate to Ofwat that investment in
innovation does provide considerable returns on investment. Ofwat should explore
ways to actively support SMEs and water utility companies with the development,
testing, approval and installation of new technologies which will greatly improve
the level of innovation and development in the water industry. Ofwat should
continue to build on the findings of its own paper titled Innovation priorities for
the water sector, published in 2011, by reviewing the mechanisms by which they
regulate the industry, learning from experience elsewhere – e.g. Ofgem’s new
RIIO price control scheme.
Ofwat and DEFRA should review examples of innovative funding methods
provided by the State of Illinois, USA and Mekorot of Israel, to explore ways to
ensure funding is available for innovative projects in which outcomes are often
less certain than for conventional projects in the water industry.
DEFRA and Ofwat, along with the Open Data team in the Cabinet Office, and
wider industry stakeholders, should explore the deployment of infrastructure to
collect real time information on the UK water network and market. This
information should be made publically available. As in other sectors this
information can then be used by the private sector and others to provide
innovative value-added services to industry and consumers. This could help drive
competition and innovation between industry players.
2.9.2 UK Business has a responsibility
Alongside the vision set out in collaboration with government, UK businesses
must develop a stronger vision of how a smart water system will operate and how
it will benefit all - clients, utilities, Ofwat, Government, taxpayers and the
environment. The tangible and intangible benefits will need to be identified,
understood and valued.
These benefits will likely only be realised through innovation in business models
and by developing incentives for consumers (e.g. advanced tariffs), and
collaboration between all parties. Businesses must engage with government and
Ofwat to help drive this collaboration forward. Utilities must also be more open to
collaboration and engagement with innovative SMEs.
The public needs to be brought along on this journey, and public awareness
campaigns are a crucial element, building the public case for the introduction of
smart water technologies, engaging with the legitimate concerns around privacy
and data security, and demonstrating and evaluating the benefit to the consumer.
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3 Smart Transport Management
Increasing urbanisation means cities are facing more congestion and associated carbon
emissions, while still needing to provide good quality of life. In particular, congestion costs
the UK economy €24.5Bn a year in lost production. The growing demand for smart transport
solutions to address congestion from city authorities and commuters means that the global
‘Smart Transport’ market, including digital and physical infrastructures, and associated design
and advisory services, is expected to be worth over $100 billion by 2018.
UK businesses have the skills and experience to deliver and succeed in this exciting and
growing market if certain barriers can be overcome. It is often difficult for innovative
companies to deploy solutions in the UK due to a fragmented vision and market: there is little
agreement between cities on requirements and standards for basic infrastructure, so there are
few economies of scale for buyers or sellers. Cities are also reluctant to spend scarce funding
on untested solutions. There is a role for national and local government to develop a common
vision and roadmap for deployment, develop system wide pilots and facilitate collaboration
between cities, academia and industry.
3.1 Introduction
The development of transportation systems is changing now more quickly than at
any stage in the past 50 years. Advancements in communication technology
combined with improvements in transport technology are now enabling cities to
provide for more seamless movement of people and goods.
Increased urbanisation and population growth in cities, driving down energy costs,
improving standards of safety, finding more sustainable methods of travelling and
a desire for better integration of transport modes, are some of the challenges
which confront city managers when they develop their transport policies.
Advancements in technology are now providing global opportunities in smart
transport management as cities try to reduce the burden of congestion and
improve the lives of their residents.
Research organisations have different valuations of smart transport market
depending on the extent by which they evaluate the many disruptive influences
which smart transport solutions are likely to bring. Pike Research values the
global smart technology sector at $1.3Bn in 2012, rising to $5.5Bn in 2020,
however this is based on an evaluation of the technology which be used. Markets
and Markets value the market at $26.7Bn in 2012 and expect it to be worth
$102.31 billion by 2018, and their estimation encompasses the wider sectors of
the transport industry which will benefit from the investment in smart transport
solution.
Smart Transport
City managers and Governments are coming under increasing pressure from
commuters and businesses to reduce congestion and to improve the quality of life
of those living and working in cities. Smart Transport solutions are seen as a
means of enabling these improvements.
A ‘Smart Transport System’ is one which enables people to take more control
through informed choice of how and when they access transport, enabling the
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public transport. A smart transport system is one which integrates information
from different modes of transport, including trains, buses, and tube, etc. It also
facilitates the efficient movement of goods through a city, and ensures logistics do
not become a burden on a city. A smart transport system requires control,
operation and access to open data; it also requires people with the necessary skills
to integrate disparate systems. Cities will have to build new services and open up
existing systems (including data collection and data display) to cater for
development of smart transport solutions.
Figure 3.1: Connecting Transport - The Smart Transport value chain: Source: Arup
Figure 3.1 demonstrates the interaction between the different stakeholders and
transportation services in a Smart Transport System. Refer to Section 3.3 for
description of the stakeholders.
At the device end, Intelligent Transport Systems (ITS) are a key component of
Smart Transport solutions. ITS solutions range from roadside devices, such as
vehicle detection, to passenger carrying devices such as smartcards. In a ‘systems
environment’ they can range from fleet management systems to integrated real-
time management systems. Countries and regions of the world often group or
define Intelligent Transport Systems according to their entry level into the market.
Early adopters, such as UK, Japan, Australia and USA have in some cases been
leapfrogged by new entrants, such as Middle East countries, parts of Eastern
Europe, and China where legacy migration has been avoided. Legacy technologies
and infrastructure are seen as the greatest barrier to a step change in ITS for many
cities.
ITS consists of ‘any technology, method or application that provides the
traveller/client with added value, guidance, improved safety or efficiency benefits
through information collection, storage, manipulation and subsequent
dissemination’. Intelligent transport systems bring greater control and automation
to road networks. They can be used to ease congestion and reduce carbon
emissions and allow for more effective responses to planned to unplanned
incidents. Whilst early systems were very much focussed on traffic rather than
transport and the traveller, they looked to measure traffic conditions and act on
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them, the current horizon for ITS is in the use of advanced analytics to predict and
adapt in real-time to network perturbations. This is a step change from the use of
SCOOT and SCATS adaptive traffic type control systems described below and
deployed since the 1980s.
As with most new technology, the ability to accept change management in terms
of changed roles and responsibilities by those operating (bus drivers, operators) in
the transport system will be fundamental to the implementation of smart transport
systems. Organisations will need to adopt a new approach of working to enable
smart transport systems to operate successfully.
Opportunities
Smart transport management will be a critical component in ‘Smart Cities’. At the
technical layer, it involves the integration of technology and communication to a
deliver a platform which provides users with a more encompassing view of
transport. It provides the ‘Smart City’ owners with a system that allows for an all-
encompassing system that enables a strategic approach to transport management
in a city. A smart transport approach needs to be sustainable, citizen-centric, and
support economic development. Pike Research estimates that from 2012 to 2020,
$117bn will be invested worldwide on smart city infrastructures, and $31.2bn of
this will be invested in the digital systems and infrastructure for smart transport
solutions.
3.2 Drivers
Transportation is a sector which affects all city users, whether they are daily
commuters, sporadic commuters, business owners, walkers, school users or
cyclists. The requirement to improve this sector is being driven by numerous
factors, which are governed by local, national and international influences.
Improving the quality of life of those living and working in cities by reducing
problems and efficiencies in the transportation sector are common goals set by
cities throughout the UK.
Cost of traffic congestion: The estimated cost of traffic congestion to businesses
and Governments is huge, estimated to be circa €111 billion per annum for EU
member states63
. The mitigation of congestion is the main priority of a number of
cities and governments in the EU. Cities and governments want to improve
productivity and reduce the cost of congestion.
The Technology Strategy Board64
noted in a 2009 memo that:
 A 5% reduction in travel time on the roads could save businesses around
£2.5bn; 0.2% of GDP.
 Eliminating existing road congestion would be worth £7-8bn of GDP each
year to the UK.
 The cost of congestion could be an extra £22bn in 2025 if action is not taken.
63
Measuring Road Congestion By JRC Scientific and Policy Reports, 2012
64
Intelligent Transport Systems and Services – Innovation Platform by Technology Strategy
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Annual cost of congestion per EU member state
Annual cost of congestion Cost of congestion as % of GDP
2009
Germany €24.2Bn 1.0%
Spain €5.5Bn 0.5%
France €16.5Bn 0.9%
United Kingdom €24.5Bn 1.6%
Italy €14.6Bn 1.0%
Total EU (available
countries)
€111.3Bn 1.0%
Table 3.1: Annual cost of congestion per EU member state Source: JRC Scientific &
Policy Reports, 2012
Quality of Life: Transport contributes to poor air quality primarily through the
use of petrol and diesel and to a lesser extent, through brake and tyre wear. Many
cities across the world are seeking to reduce air emissions from transport to
improve air quality and reduce noise as well. Poor air quality contributes to;
 Loss of life expectancy, deaths brought forward, increased hospital
admissions, soiling of buildings and damage to forests and other ecosystems.
Smart transport solutions aim to reduce all of the above to improve quality of life.
Energy use and carbon emissions: Globally, transport is the sector where
greenhouse gas emissions are rising most quickly. Demand for oil is set to rise
from 84.7m barrels per day (bpd) in 2008 to 105m bpd in 2030 with transport
being 98% dependent on oil. The transport sector is predicted to account for 97%
of this increase, as the global number of road vehicles is expected to double from
over 1 billion in 2010 to 2 billion in 202065
. Transport systems have significant
impacts on the environment, accounting for between 20% and 25% of world
energy consumption and CO2 emissions. With energy costs and pollution levels
increasing, cities and governments have to find cost effective alternative means
through smart transport solutions to improve their transport networks.
Increase in car use: Globally the number of vehicles is predicted to grow
substantially over the next 20 years with the BRIC nations seeing the greatest
increase in numbers. This will impact cities that already have inadequate transport
infrastructure. The Boston Consulting Group (BCG) predicts that sales of vehicles
in BRIC countries are likely to account for 30% of the global sales in 2014. BCG
expects sales growth up to 15% per year. Cities and Governments have to find
more effective methods of changing commuters’ reliance on cars to encourage
mass transport usage.
Optimisation of Transportation: A comprehensive ITS should enable network
operators to realise maximum capacity from their existing transportation systems.
65
International Energy Agency estimates –
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ITS should facilitate the obtaining of the quality and type of data needed by
decision makers to make sound performance-based investment decisions. An ITS
should allow a performance-based cost benefit analysis as the basis for
transportation investment decisions.
Urbanisation of population: In the latter half of the 20th century, the number of
cities with more than 10 million inhabitants increased from 2 to 50. In 2007, urban
populations surpassed rural populations. Ever increasing numbers of people living
in urban areas places a greater strain on infrastructure networks. Transport for
London estimates that by 2031 the population of London will have increased by
1.25 million inhabitants, and that 600,000 extra passengers will need to travel by
public transport at peak times66
. The London underground network is currently
undergoing upgrade works to improve its capacity and deliver more efficient
service.
Improve Safety: Reducing incidents involving vehicles as well as reducing the
number of injuries to motorists and pedestrians is a goal of City managers and
Governments.
Shift to Sustainable Transport: A sustainable transportation system
encompasses a number of different aspects. It allows the basic access and
development needs of individuals, companies and society to be delivered in a safe
and affordable manner. It operates efficiently and offers a choice of transport
modes. A sustainable transportation system limits carbon emissions and waste,
uses renewable resources and minimizes land use. A number of cities are actively
encouraging city dwellers to shift to pedestrian and cycling modes of transport to
both ease congestion and improve levels of health.
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3.3 Value Chain & Route to Market
Figure 3.1: Connecting Transport - The Smart Transport value chain Source: Arup
Figure 3.1 demonstrates the interaction between the different stakeholders and
transportation services in a smart transport system
The key actors are described below.
City Management: Personnel responsible for managing transportation systems
within cities. These are the key buyers in the ‘Smart Transport’ market. City
Managements are coming under increasing pressure from commuters and
businesses to reduce congestion, improve the quality of life of those living and
working in cities.
Transport Information Integration: These are companies involved in data
collection and interpretation to provide traffic management solutions to City
Management. These are the key sellers and potentially the innovators and
integrators in the ‘Smart Transport’ market. The products produced by companies
operating in this sector aim to optimise transportation, improve safety and reduce
congestion.
IT & Traffic Infrastructure: Companies who manufacture technology related to
traffic management solutions. These are the innovators in the ‘Smart Transport’
market. Their products are primarily aimed at companies involved with Transport
Information Integration and with City Management.
Mobility Service Providers: Provide tailored transport solutions to city
inhabitants. These are a small, but growing player in the industry offering services
to commuters.
Automotive Industry: Companies who operates in the automotive industry
(manufacturing, insurance, repair, recovery) and interested in providing
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commuters with a more comprehensive transport solution. Their smart transport
products are aimed at making transport more sustainable, greener and safer.
Design & Engineering: Develop transport strategy, policy and compliance. They
design and manage the procurement processes and install the infrastructure
network. These companies advise commuters, city management and transport
information integration companies. The goals of these companies are to design
and build transportation systems which are optimally designed, incorporate best
practises to reduce congestion, improve quality of life, lower emission and
optimise use of mass transport. UK companies operating in this field are highly
regarded globally.
Location Based Services: Companies involved in this sector provide services
such as beds, food, fuel, transportation to commuters. Commuters are informed of
available services before, during or after their commute, through the use of smart
technology which recognises their route or current location via GPS.
Marketing, Advertising, Social: Advertising companies will use the smart
technology medium (smart phones, I Pad, etc.,) to connect with commuters to sell
or provide a service. Commuters are targeted by tailored advertising techniques
depending on their mode of transport, location or smart phones setup of
companies or services which could strike a chord with commuters in that location.
Revenues provided by advertising companies could greatly reduce the cost of
development and installation of smart transport solutions for city management.
Communication Industry: Companies whose technology will be used to relay
data to transport information integration companies, city management, and
marketing information from advertising companies. Additional means of
communication (data to and from measuring devices, transport information
integrators and advertising companies) will be required. If vested parties come
together early enough in the development of smart transport solutions, the sectors
potential could be better developed to maximise revenue for all vested parties.
Route to Market
Andrew Everett, Head of Transport at the Technology Strategy Board noted ‘the
challenge for an SME (operating in the transport sector) is getting into the
eyesight of those making decisions. The challenge for SMEs is to showcase what
they can do in the home market, however the Olympics was a springboard which
should be developed’ and ‘that innovation and smartness will come from trying to
do away with the infrastructure’. Optimising existing infrastructure is a key
theme.
John Chipperfield, Chief Technology Officer of Swarco noted that ‘the UK is a
crowded market, that there is not much innovation’ and noted that ‘It is easier for
Swarco to approach a city in Europe and ask them they wanted to try them out a
new ITS systems than a UK city. In a joint effort [between Swarco and City
Council], the new traffic systems can be installed quickly, it could be done in a
month…However in the UK, this process takes a bit longer, and is a bit tougher.
City Councils in the UK need to be more proactive. Cities need to develop a
common approach, where the architecture behind the ITS software is the same and
at the same time allow for the city specific customisation’.
Darren Briggs, Associate Director in Arup noted that ‘UK Cities themselves are
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Smart Cities: Opportunities for the UK
each has over twenty Low Emission Zones in place and are pro-actively tackling
urban logistics issues to reduce carbon emissions, etc. This is evident in the FP7
scheme called FR-EVUE in which 8 cities are implementing solutions, including
ITS, to control urban freight. The scheme is led by Westminster but the London
trials have no support from TfL or GLA, as opposed to all the other cities where
the trials are being led by each City.’
3.4 Market Size
The value of the smart transport market is huge and presently growing at +20%
per annum. The present value of the market is a quarter of what it is expected to
be valued in 2018. It is estimated that the market will be in excess of $100 billion
by 201867
. This valuation includes an estimation of the smart technologies which
will be used, the amount spent on innovation, on design consultancy and
engineering, on infrastructure development and installation, on ICT, software and
analytics and on automation and control. It includes all major sub sectors of
transport, where smart applications will be used to install technologies that will
provide services such as parking management and guidance, real-time travel
information, real time traffic management and other applications to bring about
improvement in transport management.
This valuation of $100 billion by 2018 also considers ancillaries industries and
services, which will be directly influenced by the investment in smart transport
solutions. These services include traditional transport services such as road
design, development of new software services, and integration of new
technologies into legacy systems, development and deployment of business and
data analytics which will interpret live data and better manage transport within
cities.
Our research has shown that the valuation of the smart transport market varies
depending on what sectors are considered. Different research experts such as Pike
Research, Markets and Markets and industry bodies such as ITS America have
different valuations for the smart transport sector.
Pike Research - Smart City Technology Annual Revenue - Global Transport: 2012-2020
Smart Transport 2012 2015 2020 CAGR
(2012-2020)
North America $357m $773m $1,411m 18.7%
Europe $320m $757m $1,535m 21.6%
Asia Pacific $557m $1,155m $2,347m 19.7%
Latin America $72m $111m $168m 11.1%
Middle East & Asia $31m $55m $90m 14.4%
Total $1,337m $2,851m $5,551m 19.5%
Table 3.2: Pike Research Smart Cities - Technology Annual Revenue - Global Transport:
2012-2020
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Eric Woods, Research Director with Pike Research, noted ‘The differences in
valuations in the smart transportation market reflect the difference in scope of the
forecasts and also how they are related to the smart city concept. Three key
distinctions can be made:
 The total spend on ‘smart’ transportation technologies and services
 The total spend on ‘smart’ transportation relevant to cities
 The market related specifically to smart city investments’
Pike Research has based their valuation of the smart transport market on the
specific opportunity offered by the growth in smart cities (defined as the
integration of technology into a strategic approach to sustainability, citizen well-
being, and economic development). These include technologies which have been
developed to provide integrated traffic monitoring and management services,
improve congestion management, to control road user charging, enhance
emergency response, provide real times public information systems and provide
smart parking solution68
. Pike Research’s numbers focus on the market related
specifically to smart city investments. As the valuation by Pike Research of the
smart transport market only considers the smart city aspects of the sector, it can be
seen as a sub-set of wider forecasts for the entire transportation network provided
by other valuators (Markets and Markets & ITS America).
The valuation by Pike Research considers the investment likely to be made in
smart transport related to innovation and technologies by cities adopting a ‘smart
city’ strategy. This valuation can be described as the ‘seed’ money required to
unlock the much wider potential of smart transport solutions. These include the
opportunities which the development and deployment of smart technologies could
bring and the additional services and infrastructure required as a result of their
deployment.
Eric Woods, Research Director with Pike Research, noted ‘The broader
opportunities in Smart Cities could be 10 to 20 times greater than those noted (in
Smart Cities by Pike Research, 2013)’ and ‘innovation after investing in smart
ventures will open new possibilities’. Eric Woods also noted that ‘The other
aspect of smart city investment to consider is that it is a catalyst for new
opportunities around transportation technologies and services.‘ and that ‘these
broader opportunities would include economic benefits of investment in smart
transportation in terms of the development of new businesses and services and the
impact on local economic performance. For example, the European Commission
has estimated that the cost of congestion to the European economy is around 100
billion euro or 1% of GDP annually.’
Pike Research estimate that the cumulative revenue for smart transport in ‘Smart
Cities’ will be in excess of $31 billion between 2012 and 2020. This valuation is
taken over the broad transport sector, which includes sectors such as passenger
vehicles, roads, vehicle chargers, and transit fleets, controlled by various agencies
or private entities and designed to achieve a range of policy and operational goals.
Pike Research predict that most of this investment will be intelligent traffic
68
Smart Cities by Pike Research, 2013

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management systems, as this sector has room to expand and relevant to virtually
all cities.
Figure 3.2: Smart Transport Investments by Sector. Source: Pike Research
According to Markets and Markets (M&M), the smart transportation market is
presently worth $26.70 billion and is expected to be worth $102.31 billion by
2018, at a CAGR of 23.6%67
. The M&M forecast includes a valuation of the
market potential of the major sub segments of transportation, which include
parking management & guidance, providing passenger information, integrated
supervision of traffic, traffic management and smart ticketing. M&M’s valuation
also includes an estimation of the services which will be provided by those in the
service industry (design and engineering), heavy manufacturing and business and
data analytics.
M&M estimate that the global ITS market will be worth $24.75 billion in by
201769
. M&M consider North America to be the market leader in the ITS market.
However, ITS America, valued the ITS market in North America at $52 billion in
2009, but considered the many business sectors and services which will be
directly affected by the investment in smart transport solutions. ITS America
expects the ITS market in North America to rise to $73 ($67 U.S. /$7 Canada)
billion in 201569
.
69
Sizing the Intelligent Transportation Industry, ITS America, 2011
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 Electronic toll collection
 Intelligent parking guidance system
 Vehicle licence plate automatic identification
 Traffic event automatic detection
 GPS monitoring/dispatching and information service
Digital City features (to reduce congestion, reduce emission from traffic,
improve safety and security and optimise traffic flow)
 Video image based security and video image management
Figure 3.4: Smart Transport - Commuting Scenario and Solution – Based on Hitachi
Relationship between Commuting Scenario and Solution
Figure 3.5 indicates that by having different transportation companies working
together through urban management infrastructure allows for the provision of
multi-dimensional services that could not have been achieved in the past by
companies acting together71
. The diagram also shows the different layers of
information collection /interpretation and dissemination required in order to
provide commuters with relevant information.
71
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3.6 What is happening in the market
The following countries, cities and examples have been cited in this report to
showcase recent developments in smarter transport solution around the world.
They are intended to highlight best practice and identify where there are
opportunities for the application of smart transport solutions.
Global: Analysis by Arup and the C40 shows that cities are taking a wide range
of actions to improve and expand mass transit and encourage more sustainable
transportation. Of the 40 cities surveyed, about 23 cities have taken action on
transport demand management, such as implementing zonal congestion charging,
vehicular congestion charging, time/day restrictions on personal vehicle usage,
restricting parking, and time/day restrictions on vehicle usage—initiatives which
all require or benefit from smart transport technology72
. Cities also exercise
strong power over the transport sector. For example, in 26 of the cities surveyed,
mayors own and operate city roads and have powers to regulate them – a critical
requirement for congestion charging. However, only 8 have implemented either
zonal or vehicle congestion charging73
.
Dynamic Tolling
Road pricing, under which ‘Managed Lanes’ has become an increasingly popular concept in
recent years. Examples of road pricing at area level are the Singapore and London congestion
charging.
Managed Lanes can include:
• Bus and truck lanes
• High occupancy lanes (HOV) or High occupancy toll lanes (HOT)- USA
• Temporary shoulder use - Netherlands
• Dynamic re-routing of trucks - Germany
Managed lanes may or may not be tolled for some or all vehicle types depending on public
policy. Dynamic Tolling is one way of operating managed lanes. Dynamic tolls have become
popular in the U.S.A in the last decade (SR-91 Express lanes, I-495 etc.). They are also in use
in Israel. They are operated by concessionaires who take differing levels of risk on traffic/
revenue/ minimum performance specifications. Usually the key requirement is to maintain the
managed lanes at a minimum speed, thereby increasing the toll in real-time (every 5, 10 or 15
minutes, or sometimes on a monthly/ bi-annual basis) to ensure that traffic flow is maintained
at levels that meet the ‘minimum speed requirement’.
There is some debate as to the ‘larger social good’ from dynamic lanes. They are designed to
offer a reliable, faster (and more expensive) alternative to free alternatives. The revenue
maximisation motive for private operators means that free lanes become more and more
congested as you price people off the tolled lanes. Hence related issues like pollution may
become worse, especially if new managed lanes were built, adding capacity to a busy corridor
and thereby releasing suppressed demand as opposed to converting existing lanes into tolled
lanes. If discounts or free travel is offered to vehicles with 2 or more people, some benefits
may accrue by reducing the number of vehicles on the road but these will probably be
outweighed by worsening conditions on the free lanes.
72
Climate Action In Megacities: C40 Cities Baseline and Opportunities, C40 Cities Climate
Leadership group and Arup, 2011
73
Ibid

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Europe: The EU is at the forefront of developments in ITS. In key areas of
information technology and telecommunications, the EU has created the
conditions for new products and services to spread all across Europe. The thrust of
the EU strategy is set out in EU Directive 2010/40/EU ITS Action Plan74
.
Action Plan and Directive
A new legal framework (Directive 2010/40/EU) was adopted on 7 July 2010 to accelerate the
deployment of these innovative transport technologies across Europe. This Directive is an
important instrument for the coordinated implementation of ITS in Europe. It aims to establish
interoperable and seamless ITS services while leaving Member States the freedom to decide
which systems to invest in.
Urban Intelligent Transport Systems Best Practices
The collection of Urban Intelligent Transport Systems Best Practices was an activity
coordinated by the Urban ITS Expert Group. Established in 2010 by the Directorate General
for Mobility and Transport (DG MOVE) of the European Commission, as part of the ITS
Action Plan. The group is made of 25 experts from public and private organisations, directly
connected and concerned with urban ITS issues. The expert group was established to identify
and exchange best practices for the key applications of urban ITS. The objective was to
support cross-fertilisation among stakeholders through the setting up of an urban ITS database.
In 2011, the European Commission Transport White Paper; Roadmap to a Single
European Transport Area – Towards a competitive and resource efficient transport
system was issued. Issues such as multimodal intercity travel and transport and
clean urban transport and commuting are noted and a strategy to bring about
changes is outlined. Innovation and smart pricing are seen being vital to the future
success of transportation in Europe. The paper calls for the deployment of large
scale intelligent and interoperable technologies to optimise the capacity and the
use of infrastructure.
EU-Japan Cooperation in Intelligent Transport Systems: In November 2012 a
member of the Japanese Ministry of Land, Infrastructure, Transport & Tourism
joined the European Commission, DG CONNECT, for 6 months. This transfer is
intended to enhance EU-Japan cooperation in the field of Intelligent Transport
Systems research.
The objectives of the Cooperation in Intelligent Transport Systems have been
outlined as:
 Identify benefiting research and development areas;
 Share information on research projects, results and benefits;
 Involve stakeholders in their cooperative activities;
 Support strongly the development of globally open standards.
74
EU Directive 2010/40/EU Action Plan and Directive

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Stockholm: IBM in partnership with KTH Royal Institute of Technology in
Sweden has been gathering information on traffic flow in Stockholm. GPS
devices have been fitted to 1,500 taxi cabs. The data collected gives city managers
and inhabitant’s real time information on traffic flow, travel times and best
commuting options.
Oslo: Have a scheme where EVs can use bus lanes, do not pay congestion charge
and can use council car parks for free to offload – all supported by a City IT
platform.
Milan: Has free Wi-Fi across the city and is looking to use this platform to
facilitate transport IT solutions.
European Initiative on Smart Cities – Strategic Objectives
Local authorities are encouraged to propose and implement holistic problem-
solving approaches which integrate the most appropriate technologies and policy
measures. The EU wants:
 10 – 20 testing and deployment programmes for low carbon public transport
and individual transport systems, including smart applications for ticketing,
intelligent traffic management and congestion avoidance, demand
management, travel information and communication, freight distribution,
walking and cycling.
 Sustainable mobility: advanced smart public transport, intelligent traffic
management and congestion avoidance, demand management, information
and communication, freight distribution, walking and cycling75
.
Figure 3.5: Timeline for European Initiative on Smart Cities Roadmap Source: European
Initiative on Smart Cities Roadmap
UK: There are a number of important smart transport initiatives going on in the
UK.
Central London Congestion Charging: Introduced in 2003, this system had
reduced vehicle numbers in the central business district by over 70,000 per day.
The success enjoyed by London has encouraged the cities of Stockholm and
Milan, to introduce comprehensive congestion charging schemes.
75
http://setis.ec.europa.eu/about-setis/technology-roadmap/european-initiative-on-smart-cities
Page 75

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Regent Street Consolidation Centre
In terms of delivering stock to the store, out-of-town consolidation centres, where goods are
delivered in bulk and then sorted for local delivery by the most appropriate and resource-
efficient means. An example of this approach is London’s Regent Street retail delivery
consolidation scheme. The Regent Street consolidation centre is located in Enfield. The centre
acts as a first destination for deliveries from across the UK and continental Europe. The centre
sends out electric trucks that collectively deliver all goods requested by Regent Street retailers
on a specific day. The process has a number of advantages. It is more environmentally friendly
due to the reduction in the number vehicles required for delivery; it eliminates the need for
store-based storage and stock management; and it limits freight related traffic on the road.
Since its introduction, the consolidation centre has helped realise a reduction in average
deliveries from 650 to 75 each month.
The introduction of the Regent Street Consolidation Centre has reduced congestion and
emissions, optimised delivery schedules and improved levels of safety for commuters in the
Regent Street area.
FREVUE
FREVUE (Validating Freight Electric Vehicles in Urban Europe) is an EU funded project
which is intended to demonstrate the benefits of electric vehicles operating the ‘last mile’
freight movement in city centres. FREVUE will see demonstrator projects running in eight
countries and drawing on the expertise of over 30 partners. The aim of FREVUE is to deliver
significant traffic reduction and improved air quality amongst the primary benefits.
FREVUE is funded by the European Commission’s Framework Programme 7 and will result
in a total investment of €14.2 million. The project is led by Cross River Partnership through
Westminster City Council. FREVUE was launched on March 22nd 2013.
“Drawing on the significant experience we gained through our work on the Regent Street
delivery scheme which has delivered an 80% reduction in delivery vehicles in the area, we are
looking forward to working with other partners in London to deliver similar benefits.” Darren
Briggs, Associate Director, Arup.
Arup, along with The Crown Estate and Land Securities, is looking to establish new
consolidation centres for end-users with significant logistics delivery demands. Potential end
users who may take part in the demonstrator include St Bartholomew’s Hospital, Imperial
College London and Land Securities’ tenants. The first 12 to 18 months of the project will
involve the implementation stages, including initial investigation into suitable end users,
setting up consolidation centres and procuring the appropriate electric vehicles. This will be
followed by three years of monitoring and evaluation which will look to understand the
challenges of these schemes as well as the quantifiable benefits such as the number of electric
vehicles that can be deployed, the improvement in air quality, traffic reduction and potential
cost savings throughout the supply chain. As part of the project, Arup will be developing an IT
platform with ATOS to enable Consolidation Centre operations.
FREVUE intends to reduce congestion and emissions, optimise delivery schedules and
improve levels of safety in cities for commuters.
The key ITS areas being developed on the FREVUE programme are intelligent
routing systems that can change routes from traffic data, loading bay management
systems, on board systems to locate and book charging points for electric vehicles
(EV) and IT platforms to facilitate the operation of consolidation centres.

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Efficient Consumer Response
Efficient Consumer Response (ECR) is run by The Institute of Grocery Distribution (IGD) in
the UK. It is steered by a board group of experts drawn across the transport industry. The ECR
is a joint trade and industry body working towards making the grocery sector as a whole more
responsive to consumer demand and promoting the removal of unnecessary costs from the
supply chain.
The ECR offers a self-assessment tool which has been designed to help and support all
businesses in making informed decisions around technology and its relevance in solving
specific issues within their distribution businesses. This is an excel-based tool which helps
users establish the maturity of their current logistics technology, and make informed decisions
on next steps. By benchmarking against current industry examples, company operations are
examined in terms of technological development and what the next steps may be to improve
efficiency and service.
Research and Education in the UK
• The Transportation Research Group (TRG) based at the University of Southampton is well
known for carrying out research into all aspects of the development, application and impact
of a wide range of Intelligent Transport Systems (ITS) across the globe.
• The Engineering & Physical Sciences Research Council (EPSRC): The EPSRC have
recognised that with the ever-increasing demand on the transport infrastructure, the UK
industry needs researchers and future leaders, who can provide solutions to reduce
environmental impact and improve the energy and resource efficiency in the transport
sector.
• The Industry Doctoral Training Centre (IDTC) in Transport and the Environment at the
University of Southampton combines masters-level technical courses and MBA
management courses with PhD-level research.
• Other leading UK Universities include; University of Newcastle, Leeds ITS Studies, and
Imperial College London.
North America: The U.S. Department of Transportation’s (US DOT’s)
Intelligent Transportation System (ITS) Program aims to bring connectivity to
transportation through the application of advanced wireless technologies that
enable transformative change76
. Increasingly, funding investments by the Federal
Government in the U.S are targeted at major initiatives that have the potential for
significant payoff in improving safety, mobility and productivity. The main focus
has been on the integration between vehicles and infrastructure and between
modes of transportation.
The United States is considered to be not as advanced in ITS deployment as the
UK or Japan in terms of urban traffic systems, although there is a lot of activity in
fleet management and vehicle to vehicle (V2V) communications. It lags behind in
relation to the provision of real-time traffic information by Government
transportation agencies, adoption of computerized traffic signals, and maximizing
the effectiveness of its already-installed ITS systems. The United States has
pockets of strengths with regard to ITS in particular regions and applications,
76
The U.S. Department of Transportation, Research and Innovative Technology Administration
(RITA), ITS Strategic Research Plan, 2010 – 2014 Progress Update 2012

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including use of dynamic and electronic tolling, certain advanced traffic
management systems such as ramp metering. The private sector is proactive in the
USA in telematics and the provision of travel information, however the use of ITS
varies by state and region, thus leading the information to be sporadic and
isolated. The systems between states are not connected at national level.
 The ITS market was valued at $52 billion in 2009. This is expected to rise to
$73 ($67 U.S. /$7 Canada) billion in 201577
.
 There are over 400,000 people employed in the value chain working in U.S.
While overall patent applications in the U.S. were static, ITS applications
grew 17%.
 3,600 to 6,400 new employees are expected each year in the ITS sector in the
U.S. up to 201577
and 73% of ITS revenues generated by U.S. companies have
a workforce less than 500.
Green Light for Midtown
This was a significant transformative project on the streets of New York City. In 2009, the
New York City Department of Transportation (DOT) closed 2.5 acres of Broadway to traffic
in Midtown Manhattan and converted that space to pedestrian plazas. The aim of the project
was to relieve congestion while improving mobility, safety and quality of life for several
hundred thousand pedestrians and vehicles on a daily basis. The project began as a pilot using
low cost surface treatments for initial, temporary interventions while the pilot’s impacts were
studied. In the analysis of numerous performance metrics and through surveys of dozens of
user groups, the project was hailed as a huge success. The pilot was approved to be made
permanent and construction of the redeveloped plaza spaces will begin in 2013.
The New York DOT analysis of the project noted the following:
• Traffic volumes increased but congestion levels dropped.
• Significant reduction in injuries to motorists and pedestrians.
• 74% of New Yorkers surveyed agreed that Times Square improved dramatically
• The number of pedestrians travelling in the area increased.
The technology used for the development of Green Light in Midtown has been in existence for
over 20 years.
BMW i Ventures
In 2011, the BMW Group set up BMW i Ventures which it seeded with $100m. It offers high-
potential short and midterm investments in the field of mobility services. BMW i Ventures has
been set up to have access to vast corporate resources of the BMW Group and has the agility
and speed of a start-up. BMW i Ventures want to develop solutions which are tailored to the
specific demands of urban living and designed to make life in cities more pleasant both inside
and outside the car.
77
Sizing the Intelligent Transportation Industry, ITS America, 2011

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The Department of Transportation’s Research and Innovative Technology
Administration (RITA) group have identified seventeen application areas which
when combined offer a more integrated ITS. With different programmes and
priorities required to administer each application, RITA has not developed a
programme capable of governing all applications yet.
Figure 3.6: RITA: Intelligent Transport System applications
The above figure indicated the different layers of transport management which
RITA consider part of ITS applications78
Hong Kong: In Hong Kong over 11.9 million passenger journeys are made every
day, about 90% of are made on a public transport system which includes railways,
buses, minibuses, trams, taxis and ferries. Hong Kong's roads are among the most
heavily used in the world, with about 630,000 vehicles on 2,086 kilometres of
roads. In 2001 the Government of Hong Kong commenced a $423m investment in
ITS to improve the traffic management and control systems on Hong Kong's
nationwide road network. The multi-phased development of ITS in Hong Kong
was to undertaken to a common standard to ensure safety and efficiency in the
country's transportation system when completed in 2010. The project was also
intended to streamline the traffic operations on major highways, road tunnels and
urban roads.
In 2006 the HK Government conducted a review on ITS in Hong Kong, and
decided to establish a comprehensive Transport Information System and adopt a
new Traffic Management Framework to make the transport system more
intelligent. In 2006, the HK Government reported it would invest a further $3bn in
traffic control systems over the next ten years. This would fund the integration of
existing stand-alone control, information and toll systems (e.g. Octopus) into one
system.
The Hong Kong Transport Department is also developing a Traffic and Incident
Management System (TIMS) to enhance the efficiency and effectiveness in
managing traffic and transport incidents, and in disseminating traffic and transport
information to the public. TIMS has several functions including automatic
incident detection, consolidation of traffic and transport contingency plans,
provision of traffic information to stakeholders, dissemination of traffic and
transport information to the public, and coordination of existing and future traffic
control and surveillance systems. The project is scheduled to complete in mid-
2015.
78
http://www.its.dot.gov/application_areas.htm
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T-money
T-money in South Korea is similar to Hong Kong’s Octopus Card. It’s a rechargeable series of
cards and other "smart" devices used for paying transportation fares in and around Seoul and
other areas of South Korea. The T-money System has been implemented and is being operated
by Korea Smart Card Co., Ltd which is owned by the Seoul Metropolitan City Government,
LG and the Credit Card Union.
Hong Kong’s Transport Information System (TIS)
This is a centralised data warehouse for the collection, processing and dissemination of
comprehensive transport information. It provides four key services:
1. Road Traffic Information Service (RTIS) integrates existing services of Special Traffic
News, Traffic CAM Online and Traffic Speed Map for HK, Kln & NT (South) on the
Internet.
2. Driving Route Search Service (DRSS) provides motorists with an optimum driving route
search service based on options such as distance, time and toll on the Internet.
3. Hong Kong eTransport provides users with a one-stop portal for a multi-modal public
transport point-to-point route search service on the Internet.
4. Intelligent Road Network (IRN) provides up-to-date information on traffic directions,
turning restrictions at road junctions and stopping restrictions, etc. Value-added service
providers in the private sector, including telecommunication companies, fleet and freight
operators, logistic and IT organisations, can make use of the information for the
development of ITS applications such as car navigation, fleet management systems and
personalised information services to the public
China: In 2012 the Ministry of Transport in China has announced plans to
develop an ITS strategy to be rolled out across the country by 2020. The Chinese
Government hopes that an introduction of an ITS strategy will enable more
economic growth for China. The Ministry of Transport estimates that there will be
over 200 million vehicles in China by 2020, which means that China requires a
more intensive use of smart transport technologies to optimize the traffic network
and achieve lower-carbon emissions79
.
79
http://www.trl.co.uk/trl-news-hub/transport-news/latest-transport-news/intelligent-transport-
system-planned-for-china_801421169.htm

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Figure 3.7: Investment in Urban Road and Highway ITS in China 80
Investment in urban road ITS was expected to reach £1.15 billion in 2012, this
accounts for 1% to 1.5% of the total investment in new Chinese highway
construction. Investment in highway ITS was expected to exceed £1.5 billion in
201280
.
Brazil: Wasted time and fuel consumed in traffic congestion is estimated to have
cost the city of São Paulo nearly US$21bn, or 10% of the city’s economy, in
2008. Brazil was expected to invest $80bn in its infrastructure between 2011 and
2014. International experts estimate that this amount is well short of what will be
needed to handle major international events such as the 2014 FIFA World Cup
and the 2016 Olympics. The Brazilian National Confederation of Transport
estimates that priority projects (rail, road, airport and port) need US$250bn in
investment to get up to international standard.
In 2011/12 the US FCS which is the trade promotion arm of the International
Trade Administration within the United States Department of Commerce
undertook a number of trade missions to Brazil to promote the use of ITS in
Brazil. In 2011 the U.S. Trade and Development Agency (USTDA) announced it
was contributing $460,000 toward the modernization of Brazil's surface
transportation infrastructure through a grant awarded by USTDA to EcoRodovias,
a Brazilian private intermodal logistics and highway concessionaire company.
Rio – Centre of Operations
The Centre of Operations for Rio De Janerio was created to respond to natural disasters. In
2010, the second year of the current administration, a big landslide killed fifty people. It was
originally in the Olympic plan for 2016, but the Mayor decided that it was required
immediately. The operations centre was built from scratch in eight months in partnership with
IBM and Oracle. The Centre of Operations is used by decision makers in the city to operate
general, but especially to coordinate emergency response.
Over time, the administration has begun to develop routine operational uses for the operations
centre. For example the garbage trucks are coordinated through GPS, so if something happens
the trucks can be re-purposed for other tasks in an emergency situation. This helps them to
manage resources and improve efficiency of response.
80
http://www.researchinchina.com/Htmls/Report/2011/6268.html
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India: There are many social and institutional issues facing the deployment of
ITS in India; an underdeveloped road network, budget restrictions, huge
urbanisation and growth, lack of resources, lack of interest amongst politician’s
and a lack of user awareness. A few ITS applications have been introduced in
metropolitan cities like New Delhi, Pune, Bangalore and Chennai. These projects
have focused on standalone deployment of parking information, area-wide signal
control, advanced public transportation and toll collection. The projects are small
scale pilot studies. However plans are in place to develop a national architecture
and system for traffic and travel information.
Singapore: Singapore is regarded as having one of the most advanced traffic
management systems in the world. The Singapore Land Transport Authority
(LTA) uses ITS to maximise road network efficiency capacity as well as monitor
and manage traffic flow. The Singapore ITS infrastructure covers 161 km of
expressways and road tunnel systems. The Singapore LTA relies on innovative
information gathering, communication and ITS solutions to make roads safer and
keep traffic flowing smoothly. Singapore’s ITS allows timely dissemination of
traffic information which is vital in helping motorists take the best route to their
destinations.
Traffic Prediction Pilot in Singapore
The Singapore Land Transport Authority (LTA) is constantly looking for innovative solutions
to improve its range of traffic management tools. In collaboration with IBM the LTA recently
invested in scheme to predict traffic flows in Singapore’s central business district. Using
historical traffic data and real-time traffic input from the LTA’s iTransport system, IBM’s
Traffic Prediction Tool was able to predict traffic flows over pre-set durations (10, 15, 30, 45
and 60 minutes). Both speed and volume predictions covering the CBD were above the target
accuracy of 85%. In addition, during peak periods where more real-time data was available,
the average accuracy of the volume forecasts on the CBD was near or above 90% from 10 to
60 minutes into the future. With these predictions, LTA’s traffic controllers will be able to
anticipate and better manage the flow of traffic to prevent the build-up of congestion.
The Singapore LTA operates a number of ITS81
.
 Expressway Monitoring Advisory System: This monitors traffic along
expressways, alerts motorists of traffic incidents ahead of them and ensures
swift response to these incidents.
 Green Link Determining (GLIDE) System: This monitors, adjusts and
optimises green time along main roads in response to changing traffic demand.
A variation of SCTS specifically developed for the LTA.
 Junction Electronic Eyes (J-Eyes): Monitors the traffic condition at major
signalised junctions.
 Electronic Regulatory Signs (ERS): Displays prohibited turning movements
during specific time periods.
 TrafficScan: Uses taxis as probes on the road network to provide motorists
with information on the traffic conditions island-wide.
81
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 Signalised Pedestrian Crossing: Facilitates time-sharing of road space
between motorists and pedestrians.
 Parking Guidance System: Provides real-time information on parking spaces
availability of participating developments.
Australia: Australia is considered as being as one of the leaders in ITS
development. In 2011 the Standing Council on Transport and Infrastructure
(SCOTI) was formed. SCOTI combines the Ministers with responsibility for
transport and Infrastructure issues in Australia and New Zealand, and the
Australian Local Government Association. Their objective is to achieve a co-
ordinated and integrated national transport and infrastructure system that is
efficient, safe, sustainable, accessible and competitive. Achieving this objective
will support and enhance Australia’s economic development and social and
environmental well-being. National cooperation through the Council will seek to
maximise the contribution of effective transport and infrastructure to Australia’s
productivity, quality of life and equity. SCOTI sees ITS as a means of delivering
significant safety, environmental and efficiency benefits to Australian transport
users.
The ITS Architecture framework in Australia intends to deliver more consistent
and cohesive services to citizens and support cost-effective delivery of ITS
services by Government and industry by:
 providing a common language for sectors involved in the delivery of cross-
sector services
 enhancing collaboration and re-usable of sharable services
 assisting in describing and analysing ITS investments
 assisting in transforming Australia to be more citizen-centric, results-oriented
and market-based
The national ITS architecture for Australia, will be applied across all transport
modes, and is under development under the auspices of Austroads. The Australian
ITS architecture is being developed to be consistent with global developments.
Australia are now looking at Cooperative Intelligent Transport Systems (C-ITS).
C-ITS is seen an opportunity to considerably advance Australia’s road safety
through vehicles and infrastructure sharing vital information, which could avoid
collisions. The C-ITS technology will also offer productivity and environmental
advancements through improved traffic management and decision-making by
drivers. In essence, C-ITS is cars communicating with one another. The National
Transport Commission of Australia (NTC) is currently examining the policy
implications of C-ITS to prepare a final recommendation to SCOTI.
Middle East: Cities in the Middle East are modelling their ITS on best practice
from European and USA cities. Dubai has taken the lead in the deployment of ITS
in this region. The ITS system in Dubai is capable of conducting hundreds of
tasks simultaneously to advise motorist of traffic jams or alter routes, divert traffic
away from blocked lanes, moderate speed limits during congestion of incidents,
prioritises signal to assist support vehicles in accident and emergency cases.

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In a bid to create a world-class transportation system for the Emirate, Abu Dhabi's
transport authorities are implementing an integrated ITS strategy as part of their
2030 Plan. All stakeholders are tasked in coordinating and establishing a state-of-
the-art multi-modal, multi-agency transportation management centre to ensure the
number of road crashes is reduced, improve compliance to the speed limit and cut
back on the emission of greenhouse gases. A state-of-the-art transportation
management centre will be developed to incorporate a number of integrated
intelligent transportation systems. According to research carried out in the UAE
by the Roadway, Transportation and Traffic Safety Research Centre, injury
crashes to cost the country £3.6 billion annually. In addition to safety issues,
traffic congestion is estimated to cost the country £1.9 billion annually. To
provide a more coordinated and integrated approach the Department for Transport
has now taken over responsibility for the majority or roads external and internal to
the cities in Abu Dhabi.
The Qatari Government has just released an ITS Master Plan which the first in a
series of documents to standardise and proliferate the use of ITS in Qatar. Whilst
a key focus is preparation for the 2022 World Cup, ITS is also be deployed to
improved safety and reduce congestion of the road network.
3.7 UK Strengths, Gaps, Opportunities and Barriers
Strengths:
The transport industry in the UK is extensive and the country has numerous
experts working within research, technology development, consulting,
engineering and manufacturing industries. These experts work on national and
international projects providing highly regarded services. Listed below are some
of the sectors and skills in which the UK is demonstrating strength and innovation
in respect to intelligent transport systems:
 The UK education sector is highly regarded around the globe for provision of
world leading research, and development of innovative technologies for the
smart transport sector. The University of Westminster is recognised as a
global leader in the field of urban logistics and Cranfield University is a global
leader in supply chain work.
 The Engineering & Physical Sciences Research Council (EPSRC): The
EPSRC have recognised that with the ever-increasing demand on our transport
infrastructure, UK industry needs researchers and future leaders, who can
provide solutions to reducing environmental impact and improving the energy
and resource efficiency in the transport sector. The Industry Doctoral Training
Centre (IDTC) in Transport and the Environment at the University of
Southampton combines masters-level technical courses and MBA
management courses with PhD-level research.
 The University of Southampton: The Transportation Research Group (TRG)
based at the University of Southampton has research links with other groups in
the UK and overseas. Major activities have traditionally related to all aspects
of the development, application and understanding of the impacts of a wide
range of ITS. The principal sponsoring bodies for the research have been the
European Commission (EC), the Department for Transport (DfT), the
Transport Research Laboratory (TRL), the Engineering and Physical Sciences
Research Council (EPSRC) and Transport for London (TfL).

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 According to Andrew Everett of the TSB, the UK can be considered a world
leader at early stage concepts and system integration, although leadership
around full operating system may not yet be possible.
 The nation has strong capability in traffic management services through the
experience gained during the 2012 Olympics.
 The UK (London Underground) has extensive experience in designing,
managing and retrofitting underground transport systems.
 UK consultancies are highly regarded internationally and are well placed to
help bridge the gap between Universities and industry, enabling faster
development of research ideas.
Gaps:
UK based SMEs and expert companies spoken to, noted that there was sufficient
technology in the marketplace to deploy smart transport systems in the UK,
however, these companies noted that gaps in funding, manufacturing and
standardisation of the market were not helping development.
 The existing traffic systems do not provide sufficient information to enable
cities to manage traffic flow more effectively.
 There are funding gaps in deployment of ITS for City councils. City councils
have to prioritise where they allocate funding and since the tangible and
intangible benefits of ITS are difficult to define, the funding required for ITS
is often allocated to other areas.
 There are no British Standards for the development and deployment of Smart
Transport Systems or ITS.
 The UK is lacking tier one manufacturing capability (UK suppliers are not
ready to supply parts in the development of new technology). From a product
development perspective, this means that most of the equipment and
technology required will not be manufactured in the UK.
 UK SME companies find it difficult to access financing. Furthermore,
proposals by SME’s don’t often adequately explain the proposal, risk and/or
rewards to potential funders.
Opportunities:
There are significant opportunities for the UK to develop the smart transport
sector including developing its expert consulting services for export, the new
opportunities which the Transport Catapult will bring and the collective
bargaining the Government could use to drive down development costs:
 Cities such as Manchester have been very proactive in the development and
use of ITS. Manchester has recently issued a request for a Dynamic Road
Network Efficiency and Travel Information System Solution. Due to
Manchester’s success, the opportunity exists for knowledge sharing and
transfer, which would enable other UK cities to follow Manchester’s lead and
develop a similar ITS.

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 The design services provided by UK consultancy are highly regarded globally.
Opportunity exists for this field in the form of further trade missions by the
Government and UKTI, which may help grow the national industry by
unlocking new customers in developing regions across Africa, Latin America
and Asia.
 The basic infrastructure is in place for development of a strong smart transport
market within the UK (e.g. educational institutions, R&D and ITS companies).
Furthermore, the Transport Catapult should help bring about a more cohesive
voice and approach to transport related issues in the UK and as such, the
country is in a good position to adapt and use new technology (particularly if a
proactive approach is adopted).
 London has the oldest underground system in the world and a wealth of
knowledge in designing underground systems. This information can be better
harnessed and utilised to drive innovation in the UK.
 There is an opportunity to utilise the Government’s purchasing power to better
procure ITS technology. The government and local authorities could use their
purchasing power for better effect to enable cities to benefit from improved
procurement.
 Opportunities exist for wider distribution of income generated from the release
of transport related data.
Barriers:
For a smart transport system to be deployed in the UK, a number of substantial
barriers such as the fragmentation of the sector, slow adoption of new
technologies, the lack of a holistic vision for the sector, and lack of SME
development need to be overcome. An overview of the barriers in place hindering
UK firms developing in this sector is provided below:
 There is no strategic, holistic vision set out by the UK Government for ITS.
This results in technology developers and customers having different
perspectives of what ITS is, and what it should offer cities. This lack of vision
also acts to constrain legacy investments.
 There are over 300 different authorities in the UK responsible for making
decision on roads and transport. As such, there is no cohesive voice
championing ITS and its benefits.
 Cities are slow to adopt new ITS. Industry experts noted that this may be a
result of a lack of funding or the perceived risk of implementing a new system.
The lack of speed with which city councils are adopting technology is stifling
innovation and forcing UK businesses to seek revenue opportunities abroad.
 Industry experts noted that UKTI are looking for large opportunities, therefore
there are fewer opportunities for small players operating in the market. UKTI
need to develop a more cost effective way for UK SMEs to establish
themselves in the domestic market.
 Collaboration and behavioural change is required from operators and end
users in order to provide more efficient and cost effective transport services.
Policies need to be developed that can drive better alignment among
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 The public have a misconception of what ‘Smart Transport’ represents which
stakeholders need to educate.
3.8 What the UK Government is doing?
Until recently, the UK Government hasn’t taken an overly proactive role within
the industry - it has thus far failed to set goals or a strong vision for the ITS
industry. The Government’s lack of involvement has hindered development and
deployment of new technologies and as a result, the transport industry is
fragmented and has no cohesive voice. Despite this, there are currently a few
examples of Government development and investment in the smart transport
system space. Examples of Government action which have been undertaken to
date are included below.
Transport Systems Catapult: In March 2012, the Chancellor of the Exchequer
announced the creation of a Transport Systems Catapult. This organisation,
established by the Technology Strategy Board (TSB), is intended to become a
technology and innovation centre which will enable UK businesses to benefit
from the rapidly growing market for innovative transport systems and services.
The TSB wants the UK to be the first place in the world where companies develop
and deploy their next generation of integrated solutions for transport, and be a
strong base for UK firms to secure global market share over the long term. Will
Whitehorn was recently appointed as Chairman of the new Transport Systems
Catapult.
The Transport Systems Catapult will form part of a network of world-leading
technology and innovation centres. It is a long-term investment, which aims to
open up global opportunities for the UK companies which will generate economic
growth for the future82
.
UKTI: The UKTI have an automotive sector, however they do not have a specific
sector on transport. Between 2005 and 2012, the Intelligent Transport Systems
and Services (ITSS) Innovation Platform developed by the TSB invested jointly
with industry and other funders in projects which promoted UK-based R&D in the
field of ITS to strengthen relevant supply chains within the UK. ITSS was set up
by the UK Government to develop innovative products and services in response to
market opportunities that would result from UK Government led interventions in
transport. The TSB’s goals for innovation were aligned with the five goals
contained in the DfT’s ‘Strategy for a sustainable transport system’.
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3.9 Recommendations
3.9.1 What could the UK Government do better?
Leadership and Collaboration on standards and vision
The UK Government, through the Department for Transport, should develop
policy on how the UK’s urban transport issues could be addressed using smart
urban transport solutions and develop a roadmap and targets in collaboration with
industry stakeholders, cities and local government. The TSB’s Transport Systems
Catapult will have a role in coordinating a common vision which could be a
platform for policy development. It is essential that this vision is clearly
communicated to the industry and the public once developed to give confidence to
investors by demonstrating government commitment.
BSI should be tasked with developing national standards for smart transport
solutions to provide consistent definition and understanding within the industry
and those that procure smart transport solutions (cities and local transport
authorities), in the UK and abroad. BSI should also take the lead in developing
these standards internationally, potentially enabling British business to access
more urban transport markets.
There is some disparity in levels of experience and expertise amongst UK cities
and local transport authorities. The government should encourage better
knowledge sharing between cities around topics such as the latest art of the
possible, innovative procurement routes, and the intangible benefits, so
encouraging more UK cities to explore smart transport solutions.
Encourage and Drive Innovation through collaboration, funding changes and
open data
The Department for Transport should explore ways to encourage innovation in the
transport market. This might include actively supporting local authorities, local
transport authorities and SMEs with the development and testing, approval and
installation of innovative smart transport solutions. Streamlining the approval
processes to speed innovation and encourage more ‘experimentation’ by cities,
perhaps introducing fast-track approval of environmentally sustainable projects.
Currently slow bidding processes, dispute resolution and long licensing periods
increase costs and the time required to transform transport patterns in major cities.
New installation mechanisms and possibly funding should be put in place,
encouraging City Councils to trial new smart transport solutions.
This might also include funding for technology development test beds and proof
of concept demonstrations. This would be similar to the UTMS (Universal Traffic
Management System) initiative in the mid-1990s, where the UK Department for
Transport initiated a six-year programme to assist local authorities gain the most
from ITS and achieve their transport objectives. In conjunction with local
transport authorities, the Department for Transport should explore innovative
funding models to ensure funding is available for the most innovative smart
transport projects in which outcomes are often less certain than for conventional
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Cities should be encouraged to follow the example of Manchester in setting up
Transport for Manchester and their recent proposal to procure a managed, hosted,
multi-modal transport related Dynamic Road Network Efficiency and Travel
Information System Solution.
The Department for Transport, along with the Open Data team in the Cabinet
Office should also consider the development of infrastructure to collect and open
up real-time information from across the UK’s local transport authorities (much
already exists), allowing more common open interfaces for the private sector to
develop and expand innovative value-added services across more UK cities. This
could also help drive performance improvements and innovations between local
transport authorities.
3.9.2 UK Business has a responsibility
Alongside engaging and collaborating with BSI and with national and local
government to help define visions and standards, UK business must also work to
develop a clearer business case. Fundamental to this will be better understanding
of the definition of smart transport solution and their benefits to citizens, cities,
and industry. Companies need to be creative in how they measure the benefits of
transportation systems. They should clarify and quantify the tangible value drivers
of smart transport solutions such as reduce congestion and shorten commute time.
Companies must also identify the intangible benefits of smart transport solutions,
for example putting a value on how much a satisfied customer is worth.
In tandem with local transport authorities, companies should develop incentives
for consumers to encourage engagement e.g. price reductions, modal shift reward
schemes and bonus points. This should be combined with a more customer-centric
approach and public awareness campaigns to build the public case for smart
transport systems and engage with legitimate concerns around privacy and data
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4 Waste Management
Our review of the waste management industry has indicated that there is not a significant
amount of smart technology being used in the waste industry at present. Firms generally use
technology to reduce cost and improve efficiencies. However, there are only a small number
of examples where companies have used smart technology to create an economic benefit.
Current economic, regulatory and environmental conditions do not appear to be driving key
players in the industry towards the adoption of smart technologies. The smart waste
management is a nascent market, whose true economic value and wider environmental
benefits require further research in order to be fully determined.
Waste is a by-product of economic activity and the smart management of waste will have
economic implications, however waste has never seen the same level of research, innovation,
product development or investment as the water or energy sector. Human behaviour towards
waste, its generation and treatment, plays a significant role in explaining why the uptake in
smart waste management is lagging behind those of other smart sector.
4.1 Introduction
Smart technology employed within the waste management industry focuses on
enhancing the efficiency of collection and separation. The main driver behind
these technologies has been cost reduction and the need for many cities to
improve their recycling performance. Waste is a by-product of economic activity
and the smart management of waste will have economic implications which will
influence productivity, government expenditure and the environment.
The collection and disposal of controlled waste in the UK was estimated to be
worth £8.9 billion in 2011. This market has grown recently through the
implementation of EU Directives which are aimed at reducing the volumes of
landfilled waste and increasing the levels of material recovery through recycling,
composting and energy-from-waste83
.
The global waste management industry has annual turnover of $430billion and
around 40 million workers. It is estimated that 60% of all waste generated in
Greater London is currently exported for treatment or disposal outside of the area.
This is contrary to a key objective set out by the UK Government’s Waste
Strategy for England 2007, which states that waste should be managed as close as
possible to the point of production. To this end, London has set a target to achieve
85% self-sufficiency in the management of its waste.
Reducing the amount of waste being sent to landfill is a problem that unites cities
with very different levels of wealth and across all regions, but large reductions can
be made. For example, New York sends 64% of waste to landfill while Paris
sends 11%. Copenhagen has put an integrated programme in place over many
years, and now sends less than 2% of waste to landfill; in 1988, over 40% of its
waste was sent to landfill. Half of Copenhagen’s waste is now recycled and
83
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maximum use is made of waste to generate heat for the city’s district heating
network. On the west coast of America, San Francisco leads the way with a
landfill disposal diversion rate of 72% and the city has set itself a target of zero
waste to landfill by 2020.
Figure 4.1 below shows the waste industry, from the generation of different forms
of waste to collection and the different forms of treatment to waste. The
application of smart technologies has been limited to a few areas of the industry to
date.
Opportunities:
WRAP estimates that of the 600 million tonnes of products and materials that
enter the UK economy each year, only 115 million tonnes is recycled. Between
now and 2020, WRAP estimates that electronic waste in the UK will total more
than 12 million tonnes with a market value of £7bn. WRAP estimate that the UK
hospitality sector could save £724 million a year by tackling food waste. Through
deployment of smart technologies such as RFID tagging and GPS tracking in the
collection of this food waste, a significant saving could also be incurred in the
movement of the waste.
Figure 4.1: Waste collection and treatment Value Chain
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4.2 Drivers
The management of solid waste has traditionally lagged behind those efforts to
manage waste water or generate renewable energy. However, there are a number
of drivers that emphasis why the UK should take the smart management of waste
more seriously:
Urbanisation of population: In the latter half of the 20th century, the number of
cities with more than 10 million inhabitants increased from 2 to 50. In 2007, urban
populations surpassed rural populations. Finding cost effective, sustainable
mechanism to treat waste is becoming an issue for a number of city councils.
Waste management firms needs to be able to develop and deploy smart
technology to reduce costs and improve efficiencies and also to deal with less
space and resources.
Improve quality of life: Ever increasing numbers of people living in urban areas
places a greater strain on waste management services. This can lead to increased
pollution in city environments which could have a knock on effect on human
health as a result of uncontrolled dumping and disposal84
.
Maximising resources: Many of the materials that are disposed of in the UK
could be reused and recycled if markets were available. In many cases this does
not happen, which contributes to a depletion of the world’s natural resources. The
UK needs to improve its waste recovery rates, particularly in the non-municipal
sectors, and to develop waste treatment and recycling infrastructure. Smart waste
separation, RFID tagging should facilitate this.
Landfill Directive targets: Major infrastructure investment will be required to
meet the EU Landfill Directive targets set for 2013. This directive requires
countries to increase their waste recovery rates. Further investment will also be
required before 2020 to meet the targets set out by both the Landfill Directive and
the EU Renewable Energy target.
Energy use and carbon emissions: The management of solid waste accounts for
up to 3% of global CO2 emissions. The cost of treating waste is also escalating.
RFID tagging and GPS on waste collection vehicles should facilitate this.
Public perception: Deploying new smart waste management mechanisms is a
means of enhancing a company’s reputation.
Local community development: The detriment to the local amenity that results
from the mismanagement of waste85
have led to communities to spearhead new
initiatives in managing their waste issues.
These drivers while important do not appear to be having a significant effect on
the smart waste sector. The current economic, regulatory and environmental
conditions have not had the same effect on technological innovation in the waste
sector as they have had in other sectors examined in this report.
84
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to-illegal-dumping-1.1357615
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4.3 Market Size
A value for the smart waste management sector could not be determined. Market
research companies do not have valuations prepared on the sector because the
sector is so nascent. Globally, the market for waste management as a sector is
expected to be worth $475 billion by 2015. The Asian market will account for
$184 billion and the Canadian market for $4 billion in 201586
. The waste
management industry covers a huge variety of operations for different waste
streams and different phases of the waste life-cycle. The industry is expected to
grow significantly in Asia and developing countries as the economic fortunes of
developing countries in Asia improve.
In 2009, Veolia estimated that the total amount of waste generated annually
worldwide (municipal, industrial, hazardous) is more than 4 billion tons. The
waste management industry has annual turnover above $430 billion and around 40
million workers (including informal recyclers).
The smart waste management sector is a very small percentage of the global waste
market at present. As economic parameters, regulations and public requirements
changes, it will then start to have a significant role in the overall waste sector.
Figure 4.2: Solid Waste - CAPEX and OPEX - Global Market across regions, 2010-15,
Global Cleantech Report 2012
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www.statista.com/statistics/246178/projected-global-waste-management-
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4.4 Waste Value Chain
Figure 4.1: Waste collection and treatment Value Chain
The waste cycle is extensive and comprises of many different operators and
stakeholders. There are many mechanisms to generate waste, which require
separate and sometimes exclusive forms of waste collection and treatment. The
application of smart waste technology solutions has been limited to a few areas of
the industry to date. While there have been huge developments in treatment
technology recently, the use of smart technology within these treatments has been
limited.
Design & Engineering Companies: These companies develop waste strategy,
policy and compliance. They design and manage the procurement processes
which the present waste sector operates on. These companies advise communities,
city management and technology providers, O&M companies. The goals of these
companies is to design and build waste systems which are optimally designed,
incorporate best practises to increase efficiency, be sustainable, lower emissions
and optimise use of resources. UK companies operating in this field are highly
regarded globally.
Technology Providers: These companies provide technical products and advice,
they design systems into projects, liaise with vested parties to ensure their system
integrates into the overall design and commissioning. These are the key sellers in
the industry, the innovators and integrators in the ‘Smart waste’ market. The
products produced by companies aim to optimise collection routes and treatment
of waste.
O&M Companies: These companies procure technologies for their waste
management facilities, operate and maintain the facility, finance the facility, they
are responsible for waste collection and the performance of treatment facilities.
These are the key buyers in the industry and are the likely recipients of the major
economic benefits if smart technologies were to become more common place.
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Smart Public Realm Bins: Big Belly Solar UK is a company that produces a
street waste collection bin that is a self-contained compactor powered by the sun.
The bins can hold more waste than the average street bin due to the compaction
feature. The smart angle is that when these bins are 85% full they send an email or
text message alerting the collection contractor. This results in a reduced number
of collections which saves on collection costs and GHG emissions from collection
vehicles. As an added feature each Big Belly bin can transmit a Wi-Fi Platform
providing local Council information and local retailer offers.
A study undertaken by Big Belly Solar over six years with 162 UK Councils
shows that on average the frequency of bin collection dropped by 86% after the
Big Belly Solar bins were installed.87
The city of Groningen in the Netherlands saved €92,035 after it installed public
bins that could then sent text messages when they were full. Groningen city
council reduced labour hours and petrol costs by only sending trucks out to bins
that needed emptying.88
Refuse Collection Vehicle GPS Tracking: Many waste collection companies
utilize GPS tracking on their refuse collection vehicles (RCV). GPS enables RCV
fleet operators to track their vehicles with regards to their location, speed and
historical routes. This information is useful for monitoring, analysing and
improving the efficiency of their operations. GPS tracking enables the most
efficient collection routes to be established and also enables operators to divert
RCVs to locations that require immediate attention.
In Sevenoaks, Kent the Verdant Group Plc (a specialist municipal services
provider) installed GPS tracking in 200 refuse and recycling vehicles89
. The GPS
system reported vehicle movements (authorised or unauthorised), tamper
attempts, ignition state and a host of other data via eight input/output ports that
were used for additional monitoring sensors. Verdant used these additional
sensors to record time, location and process information for functions such as
wheeled bin lifting and loading, street cleansing with powered brushes, travel
speed and so on. This helped confirm that work is being carried out in the correct
locations to mutually-agreed schedules and standards, a key performance element
of Verdant’s contracts.
Radio Frequency Identification (RFID Tagging): Waste reduction is primarily
a behavioural issue but can be influenced through provision of new and existing
information and communications technology, including: use of pay-by-weight
mechanisms using RFID tags on waste bins; and use of smart-metering and swipe
card access to monitor waste outputs and measure effectiveness of waste
reduction initiatives.
RFID tagging of waste bins has been in use for some years now. The system
works by attaching a unique RFID chip onto each wheelie bin. As the bin is lifted
and emptied by the refuse collection vehicle, the RFID chip is scanned and the
bins weight and contents are recorded. This is then stored in a central database
that that can be used to monitor the quantity and types of waste people are
disposing of. In addition to RFID chips on conventional wheelie bins other waste
87
www.bigbellysolar.co.uk/about
88
Maia Palmer, FT, Monday 28th Feb 2013
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systems are now using RFID swipe cards to control access to certain bins and also
charge people for the type and quantity of waste they dispose of.
In South Korea, RFID swipe cards have been introduced for food waste bins.
Food waste management in South Korea costs the government. The South Korean
government is looking to reduce the amount of food waste that is generated. In
response to this South Koreans have been issued with RFID swipe cards which
debit their accounts according to the amount of food waste they generate, the
swipe cards can also be used to access public transport.
Figure 4.4: RFID activated food waste bins in South Korea
Source: www.guardian.co.uk/sustainable-business/south-korea-swipe-card-food-waste
Automated Waste Collection Systems: Automated Waste Collection Systems
(AWCS) have been in operation for decades. However, the first system in the UK
only came into operation in 2008 at Wembley City in North West London. An
AWCS can transport waste from each floor of a building/complex of buildings
and communal area pneumatically through a set of pipes. An AWCS consists of a
number of waste inlet points, linked together by a network of pipes that transport
the waste to a central waste collection station for compaction and temporary
storage.
Suppliers of this technology provide different variations and models that collect a
broad range of waste. For example there are some systems that collect food waste
only from commercial kitchens, linen from hotels and hospitals, mixed waste and
recyclables from residential areas and also systems that have no collection station
but instead are emptied by a special truck that sucks the waste out of the system at
designated intervals.
AWCSs are being successfully used in many countries across the world (including
the UK, Sweden, Spain, Germany, Korea, Singapore, Malaysia, Hong Kong,
China, USA, Qatar and Dubai). The design life of the AWCS is about 30 to 40
years depending on the thickness of the installed pipes, the type of waste
transported and the number of bends in the pipe network. There are no UK owned
suppliers of AWCS technology however, there are several global providers. The
smart aspects of this technology are:
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Figure 4.5: An illustration of an Automated Waste Collection Systems system
Source: Envac
 It enables the use of RFID tagging to track who deposits what type of waste in
each inlet. The system can weigh the waste based on type is versatile and
modular so it is future proof and easily expandable and adaptable
 The system is controlled by a computer system that enables easy control over
how often and where the system is emptied. The system can be programmed
to empty at set intervals or based upon how much waste is deposited in the
inlets, this helps it adapt to special events when the waste generation rate can
spike.
Mechanical Separation of Waste: Once waste has been collected from its source
of generation (homes, offices, hotels etc.) it is often taken to a Materials Recovery
Facility (MRF). These can be clean (for sorting recyclables) or dirty (for sorting
residual waste). These facilities contain a number of different mechanical sorting
technologies that can separate waste based on the following properties:
 Size & shape,
 Density,
 Magnetism,
 Electrical conductivity and
 Optical properties
The primary basis for their use is to extract valuable resources from the waste
stream. A number of smart technologies have been taken from other industries
and adapted into MRFs to separate material.
Mobile Phone Applications: There is potential to engage the public in better
public realm management, especially around waste. The Love Clean London
initiative uses mobile phone and ‘apps’ technology to enable members of the
public to report environmental quality issues such as graffiti vermin, poor waste
storage and fly-tipping to their local authority. Users can send a text, upload
photographs online or use a free mobile phone application to submit reports to
their local authority. Reports are shown on an online interactive map, which
allows local authorities to prioritise clean-up operations where most needed,
helping to maintain a clean and pleasant public realm environment for the
community. It also enables photographs to be displayed to show where clean-ups
have taken place and the results of the action taken.
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4.6 Regional highlights
Most of the trends occurring in the waste management industry focus on
enhancing the efficiency of collection and separation, however many of these
recent developments and improvements would not be considered ‘smart’. The
following countries, cities and examples referred to in this section provide an
overview of the contextual currencies which are affecting waste management on a
regional and country basis. They are intended to highlight new and best practises
around the world in waste management and sometimes smart waste management.
Europe: Western Europe is recognised as world leaders in waste management.
This is mainly due to legislation (EU Landfill Directive) being in place the longest
and having more developed economies. There is no leading country which can be
identified in this sector. Western Europe is moving away from landfill and is now
using a combination of recycling, biological treatment and thermal treatment. In
Europe 30 to 40% of the waste in now used in Waste to Energy (Anaerobic
Digestion and Thermal Treatment combined).
The Netherlands recycles 64% of its waste and most of the remainder is
incinerated to generate electricity and heat. Only a small percentage ends up in
landfill. The Dutch approach is known as 'Lansink's Ladder' - avoid creating waste
as much as possible, recover the valuable raw materials from it, generate energy
by incinerating residual waste, and only then dispose what is left over – but do so
in an environmentally friendly way. This forms the basis of the 'waste hierarchy'
in the European Waste Framework Directive. The lack of space in the Netherlands
and a growing environmental awareness forced the Dutch government to take
measures early on to reduce the landfilling of waste. This in turn gave companies
the confidence to invest in more environmentally friendly solutions.
UK: Department for Environment, Food and Rural Affairs (Defra) recently
withdrew £200 million of Private Finance Initiative (PFI) credits from three waste
infrastructure projects. Defra has already invested some £600 million in its Waste
Infrastructure Delivery Programme, and will invest a further £3 billion in 29 PFI
projects over the next 28 years in order to meet EU targets. The Chartered
Institute of Waste Management (CIWM) has expressed their concern about the
short and longer term impact of the Defra’s decision on the waste and resource
management sector. The CIWM have called for a long term, joined up approach
to resource management in the wider sense.
UK waste generation has been reducing since 2000, decreasing by 11.3% between
2004 and 2008. The industrial and commercial sector saw the biggest percentage
change in generation with a decline of 17.3% over the period. In 2008 the UK
total waste generation was estimated at 288.6 million tonnes (mt), down from
325.3mt in 2004. During the same period the quantity of waste recovered in the
UK has increased by 50% from 95mt in 2004 to 143mt in 2008.
USA: In general the USA relies heavily of landfill disposal. There are however
many variations between cities and states. The Rocky Mountains states and
Midwest states depend mostly on landfill disposal, primarily due to the
availability of cheap land. While the states in the west and north east have more of
a balanced mix between landfill disposal, recycling and waste to energy. San
Francisco leads the way with a current landfill diversion rate of 72% and a target
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Hong Kong: Hong Kong currently disposes the majority of its waste at three
contained landfills located strategically throughout the territory. However, over
the years the amount of waste that Hong Kong generates has continued to increase
resulting in the lifespan of the landfills decreasing. To solve this problem Hong
Kong is currently in the process of revolutionizing the way it manages its waste.
This will be achieved through a combination of waste reduction efforts and
recycling, the construction of two separate sludge and municipal waste power
plants, organic waste treatment plants, construction waste management facilities
and extending the existing landfills.
China: China is now the largest generator of waste in the world, producing
approximately 190mt a year. In recent years, the Chinese central and local
governments have made great efforts to improve waste management in China.
New regulations and policies have been issued, urban infrastructure has been
improved, and commercialization and international cooperation have been
encouraged. However, China still only captures and treat approximately 60% of
the total waste generated. The use of energy from waste technologies
(incineration, anaerobic digestion etc.) is one the faster growing waste
technologies in China.
India: India has a very under developed waste management sector. Open
dumping is prolific and the environmental and human health impacts associated
with this are endemic. India has however, made great strides in developing small
scale organic waste treatment processes such as Anaerobic Digestion and Aerobic
composting. There are huge opportunities for UK companies to offer their
services to India.
Singapore: Singapore has set itself a target of 70% recycling by 2030. The
Government is also placing more emphasis on waste generation reduction, source
separation and education. There are great opportunities for Singapore to increase
the recovery of resources from organic waste and prevent this from being
disposed at landfill. Singapore is also investing in the next generation of thermal
treatment plants to further reduce the need to dispose of waste at landfill.
Brazil: Brazil relies heavily on the informal Catadores (waste collectors) to
collect and recycle materials such as paper, plastics and metals. In major cities
such as São Paulo, the majority of the waste is collected by concessionaries.
Brazil operates a very good waste collection network but lacks the infrastructure
that can recover resources from the waste stream. Cities like São Paulo are
looking at developing energy from waste thermal treatment plants but in addition
to that there is good potential for organic waste treatment facilities as a large
percentage of Brazil’s urban waste is organic.
Brazilian Waste Market Summary (UKTI Report, 2010)
Industry Size $10 billion p.a. huge number of organisations (for instance
more than 5,500 municipalities, several hundred hospitals, and
many private waste generators, which are under increasing
pressure to take more responsibility for their waste).
Industry Structure Large and SME for municipalities, their contractors and
independent firms large an SME for industry, construction,
hotel & catering etc. some fragmentation growth
Growth (5-year trends - output
& investment)
7 to 10% per year
Short to medium term outlook Healthy

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Main strengths Latest legislation and policy towards optimising the ‘waste
hierarchy’
Gaps identified Technology, skills, equipment, capacity to deliver
Table 4.1: Brazilian Waste Market Summary, UKTI Report, 201090
For UK companies seeking to do business in Brazil, UKTI advises that these
companies should focus on exporting expertise and technology that is not
available in Brazil. For lower-end solutions, UK firms should consider some form
of joint venture, partnering with NGOs for design consulting advice.
Middle East: The Gulf States waste management services industry has developed
into a multi-billion dollar market. Governments in the region are providing
substantial investments. The GCC countries are using advanced waste
management solutions for treating both domestic and industrial waste. Increasing
urbanization and an influx of immigrants from other countries are leading to
higher volumes of waste.
The GCC countries are using the latest alternative waste management solutions
for recycling, composting, and waste-to-energy. The Gulf market offers more
opportunities than the markets in developed regions. The scale of the projects in
the Gulf States creates substantial prospects. The market in the GCC suffers from
inadequate information being available in the waste market; however this is
expected to change soon, which should allow for the full potential to be
determined. Stringent environmental regulations are now in place in the GCC
States which should also help develop the industry.
4.7 UK Strengths, Gaps, Opportunities and Barriers
Strengths:
The waste industry in the UK is extensive and the country has numerous experts
working within the consulting, operational and engineering sectors. These experts
work on national and international projects providing highly regarded services.
 UK consultancies are highly regarded internationally and are well placed to
help bridge the gap between Universities and industry, enabling faster
development of research ideas.
Gaps:
Our review of the sector shows that there is an insufficient understanding of how
smart technologies could be fully deployed in the waste sector. There is a lack of
funding for research, innovation development, and large scale trialling of
innovation.
 Existing waste systems do not provide/gather sufficient information (data) to
enable cities to develop/manage waste more sustainably.
90
UK Environment and Water Opportunities in Brazil, UKTI, 2010

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 There are funding gaps in deployment of smart waste technologies for waste
management companies and city councils. City councils have to prioritise
where they allocate funding and since the tangible and intangible benefits of
smart waste management have not been fully developed, they find it hard to
provide funding for the deployment of smart technologies.
 The UK is lacking tier one manufacturing capability (UK suppliers are not
ready to supply parts in the development of new technologies). From a product
development perspective, this means that most of the equipment and
technology required will not be manufactured in the UK.
 There are no British Standards or guidance notes which will lead the
development and deployment of smart waste management solutions in the UK.
Opportunities:
There are significant opportunities for the UK to develop the smart waste
management solutions such as developing its expert consulting services to advise
regulators/Governments and city councils on best practise in the UK and aboard.
There are opportunities for city councils to gain economic benefits from the use of
smart technologies which could then be put to better use to serve the public.
 The design services provided by UK consultancy are highly regarded globally.
Opportunity exists for this field in the form of further trade missions by the
Government and UKTI, which may help grow the national industry by
unlocking new customers in developing regions across Africa, Latin America,
India and Asia.
 The basic infrastructure is in place to develop smart waste management
solutions within the UK (e.g. universities, R&D and waste management
companies).
 There is an opportunity to utilise the Government’s purchasing power to better
procure smart technology for its deployment nationally. The Government
should use their purchasing power for better effect to enable cities to benefit
from improved procurement.
Barriers:
For smart waste management solutions to be deployed on a widespread level the
UK, a number of substantial barriers such as the sector fragmentation, its slow
adoption of new technologies, not having a holistic vision and lack of SME
development need to be overcome. An overview of the barriers in place hindering
UK firms developing in this sector is provided below:
 Understanding the problem: many counties/cities etc. have a poor grasp of the
waste they generate and its composition.
 Realising the potential: secondary markets into which materials could be
recycled/sold are often poorly defined, managed and regulated.
 Overcoming social concerns: waste management is often out of sight and out
of mind and can have a generally negative reputation in the community.

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 Optimizing production: many products today are designed for a short life and
to be replaced. It is often difficult to disassemble these products for recycling.
By incorporating end of life considerations into the design of products reuse
and recycling can be made easier.
 Reducing consumption: as people get richer they generate more waste.
Research and trialling of mechanisms which find a way of breaking this link
while still maintaining economic growth need to be undertaken.
 Protecting the environment: the uncontrolled dumping of solid waste can have
very negative impacts on the surrounding environment and human health.
 City councils may need to review their contracts with waste collection
companies to permit them to trial smart technologies.
 While there have been huge developments in treatment technology recently,
technology barriers which these technologies face will become barriers for
smart technologies in future.
4.8 What the UK Government is doing
The UK Government has not seen the need to take an active role in setting goals
or a vision for smart waste solutions. However, Government bodies and policies
are in place to deal with waste management.
WRAP: WRAP was set up in 2000 to help recycling take off in the UK, initially
by creating markets for recycled materials. WRAP is funded by all Governments
across the UK. WRAP work with a wide range of partners, from major UK
businesses, trade bodies and local authorities, through to individuals looking for
practical advice from our websites. WRAP helps people recycle more and waste
less, both at home and at work, and offers economic as well as environmental
benefits. WRAP goal is a world without waste, where resources are used
sustainably.
WRAP has a number of principles:
 Focus on preventing waste
 Getting value for money for the tax-payer
 They working in partnership and support the work of others
From 2011-15 WRAP aims to:
 Encourage better design and more informed consumption which will reduce
waste generation
 Make it easier to recycle, repair and re-use as much of our waste as possible.
 To enable businesses to recover as much value as possible from the waste
that's collected
 To assist business to keep resources moving round the economy.

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DEFRA Government Review of Waste Policy in England (2011): This policy
sets out the Government’s overarching approach to work towards a zero waste
economy. Central to this is the value of waste as a resource, both financially and
environmentally, and working towards zero waste to landfill. The Government’s
review sets out a number of principal commitments designed to achieve these
objectives, which are supported by a number of action plans. It also places greater
emphasis on waste minimisation at the design stage where the largest
environmental and financial savings can be made.
Planning Policy Statement 10: Planning for Sustainable Waste Management
(2011): This policy sets out the Government's policy to be taken into account by
waste planning authorities and forms part of the national waste management plan
for the UK. All Planning Policy Statements have now been superseded by the
National Planning Policy Framework; however the framework does not contain
specific waste policies, since national waste planning policy will be published as
part of the National Waste Management Plan for England.
4.9 Recommendations
What could the UK Government do better?
Leadership and Collaboration on standards and vision and
research
The UK Government, through DEFRA and other bodies, should explore how
smart waste management could help to address waste management issues in the
UK.
Government has a role in convening and co-developing platforms that enable the
waste industry, academic, associations, government entities utilities, SMEs and
local groups to collaborate on the advancement of the waste industry. These
platforms can contribute to the setting of vision and standards for smart waste
management, as well as public engagement activities, and knowledge sharing on
procurement, benefits and implementation aspects.
One outcome of the collaboration, vision and goals driven by government, should
be a roadmap or strategy for deepening academic and industrial research into
innovative applications of smart waste management concepts and their tangible
benefits, in conjunction with BIS and RCUK (Research Councils UK). Supporting
and encouraging R&D in areas of research that are currently under invested, such
as dematerialisation, the restorative economy, new business models, and
behavioural issues, will put the UK in a leading position regarding smart waste
management internationally.
Encourage and Drive Innovation through guidelines, contracts
and incentives
The public sector market for waste management in the UK is characterised by
local councils signing performance-related contracts with waste management
companies. Incentivisation models must shift to more outcome-driven models
where citizens, waste producers and waste management companies are all
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must change the way they procure waste management services. Research and
development is necessary to better understand what this model would look like,
but national government has a role in developing guidelines for local authorities
on local waste policies, procurement models and contracts, to encourage the use
of smart technologies to deliver better outcomes.
UK business has a responsibility
Alongside government collaboration and R&D efforts, UK business must also
work to develop a better understanding of the value of waste. The waste
management industry in particular must work to develop new business models
and a clearer business case. This will require a better understanding of the tangible
and intangible benefits of smart waste management solutions and the vision of
future waste management. The industry must also collaborate more closely with
the wider material and value chains – i.e. with the industries that manufacture and
sell products that currently end up in disposal. The waste management industry
must articulate more clearly how real-time information from smart waste
management solutions can be used further back in the manufacturing and design
stages of the cycle. Business is best placed to lead this collaboration, though as
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5 Assisted Living
Healthcare and social care systems around the world are seeing increasing demand as
populations increase and more people live longer with long term conditions, disabilities, or the
difficulties that come with age. There is an increasing need to help people live at home or in
their communities longer.
Assisted living technologies can help these demographics to live independently for longer,
increasing their quality of life and reducing the burden on core health and social care services
such as hospitals and formal care homes.
However, technology alone cannot achieve this systemic change. Clinicians and the healthcare
establishment must realign the established patterns of healthcare (care pathways) to take
advantage of opportunities presented by technology.
The opportunity is large, with a European market worth £500 million by 2015 alone103
, and
some healthcare systems are already benefiting, such as the US Veterans Health
Administration saving almost $2000 per annum per patient with a 61% reduction in bed days
of care. 108
The Department of Health’s 3MillionLives programme is a key cross-industry initiative for
the UK market, and alongside the UK’s strengths in product design, and life sciences and the
role of the NHS, places the UK on a good footing. Issues around pricing and standardisation,
disparity between regulation regimes, and low awareness amongst buyers (Clinical
Commissioning Groups) and local authorities need to be dealt with. These obstacles can be
overcome through industry collaboration, product and business model innovation, and the
transformation of care pathways.
5.1 Introduction
There is mounting pressure on
governments resulting from the need to
provide the right living conditions for the
elderly population in order to facilitate
independent living, against a backdrop of
rising retirement age and increased life
expectancy. This is compounded by an
increase in the prevalence of mental
health conditions and long-term physical
conditions among the ageing population.
In the UK the Department of Health
predicts up to 75 percent of people above
the age of 75 will suffer from chronic
disease, with the incidence of chronic
disease expected to double by 203091
.
Definition
Assisted Living for the purposes of this
report is a philosophy of care promoting
independence and dignity through the use
of services and technology including
instruments, apparatus, appliances, or
materials, including software, necessary
to assist people aged above 65, and those
who are physically and cognitively
impaired, in fulfilling daily activities
towards independent lives and an
improved quality of life.
Source: Adapted from Assisted Living
Technology: A market and technology
review (2012)
The global issue of an ageing population presents particular challenges for policy
makers in terms of developing and maintaining health-social care systems that are
91
Ageing population and long term conditions fact sheet, Department of Health, 2010
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affordable, sustainable alternatives to some of the more inefficient models of care
that currently exist.
Context
The environment for Assisted Living within Europe and globally is characterised
by a significant economic challenge resulting from efforts to reconcile increasing
demand for health and social care with constrained national budgets for public
funding, compounded by the impact of the continuing recession.
There is also often a largely reactive approach to chronic condition management
which is recognised as being increasingly unsustainable, evidenced by increases
in emergency hospital admissions, increasing demand for primary care services,
repeated handovers from professional to professional and inconsistent home-care
provision. The market is therefore increasingly seeking more integrated solutions
that are innovative, technologically advanced, and cost effective in order to
maintain quality of care while coping with increasing demand and limited health
and social care resources. However, while barriers to widespread adoption remain,
these are surpassable.
Figure 5.1: Overview of the value chain for assisted living technology products and
services in the UK. Source: Arup
Role of Technology
This demographic shift and the need for better health-social care and whole
system integration to keep people well and independent for longer, presents
significant opportunities for technological innovation to make a tangible
difference to people’s lives. The development of assisted living technologies and
assisted living services can efficiently enhance the living conditions of older
people and those who are physically impaired, playing a crucial role in helping
them to live their lives safely and independently.
As an emerging industry, the range of technology and applications is continually
evolving, along with an array of technology jargon. This report looks at the range
of technologies that might be categorised as telehealth, telecare, telehealthcare,
ambient assisted living, assisted living services, and assisted living technologies.
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As with the assisted living market, the meaning and use of these terms is
continually evolving.
Assisted Living
Decreasing whole‐system cost
Decreasing severity of condition
essional
Contact:
Prof
In Care Insitutions At Home
Hospital Fitness Management
Hospices
Telemedicine
Telehealth
Telecare
Basic Needs
Consultant
Doctor
Ambulance
Services
Nurse
Relatives
Trainer
Co
Healthcare
service:
The Care
ntinuum:
Figure 5.2: Diagram showing Assisted Living Technology products and services on a care
continuum. Source: Arup
Opportunities
The developments in assisted living technology (ALT) and services create a
significant opportunity for enhancing patient experience and quality of life while
reducing cost through efficiency gains and improved health and care outcomes.
This tied with demographic and socio-economic trends creates opportunity.
In the UK alone, the use of telehealth (only one of the core assisted living
technologies) across the NHS could result in £1 billion in annual savings with
hundreds of thousands of patients’ lives improved significantly92
. The
‘Healthcare without walls’ report also indicates that one of the greatest strategic
issues facing the NHS is how we manage patients with long term conditions, such
as chronic obstructive pulmonary disease, heart failure and diabetes, given that
70% of its budget is currently spent on the 15m people who have one or more of
these conditions. With ageing population and increasing patient numbers in the
UK, there are significant opportunities to radically change the approach to
delivering care to people with long term conditions (LTCs) to make it more
sustainable in terms of cost and quality of care.
In order to realise the benefits of applying technology in this area and fully exploit
the opportunities, a significant amount of joined up working and collaboration is
required within the healthcare supply chain, perhaps enabled through establishing
greater incentives and strategic drivers for adopting ALT at scale. Crucially, these
opportunities will only be fully realised when ALT is embedded directly into
patient care pathways.
5.2 Drivers
The following summarises key market drivers, outlining the most significant
factors likely to stimulate market growth for Assisted Living technologies and
services:
92
Healthcare without walls: A framework for delivering telehealth at scale, John Cruickshank,
2010
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Demographic factors driving the market
The primary demographic challenge is that of an ageing world, especially one in
which the aged are not necessarily healthy. It is estimated that by 2030 more than
1 billion people will be aged 65 years or older93
.
In the UK alone, in 2010 it was reported that there were 10 million people over
65. This number is predicted to rise to 16 million by 203494
. The fastest growing
group is people over 85 years, often referred to as the ‘oldest old’95
. Their
numbers are projected to rise from 1.4 million to 3.5 million (5 per cent of the
total UK population) by 2034. The number of centenarians in the UK is also
projected to rise from 12,640 in 201096
to 87,900 with one in four people born
today expected to live to 100 years old97
.
Despite increasing life expectancy, these extra years are not always healthy.
While global ageing shows evidence of humankind’s great medical, social and
economic advances; it also presents the whole world with significant challenges,
not least in health and social care. In particular, age is a predictor of disability98
.
An estimated four million UK older citizens (40 per cent of all people over 65
years) reported having a long term condition or disability in 2009. This is
predicted to rise to 6 million by 203097
. Such conditions can limit people’s ability
to undertake activities of daily living or attend to their personal needs.
Similarly, beyond the UK large increases in disability caused by age-related long-
term conditions are predicted in all regions of the world, with non-communicable
chronic diseases such as cardiovascular disease, dementia, arthritis and diabetes
being the largest cause of loss of health and life rather than infectious diseases and
accidents. In addition, the proportion of older people living alone is increasing,
particularly in the most developed countries. This represents a huge social change
which has taken place over the last 50 years.
Economic & Social factors: shifting customer demands
In terms of potential demand, by 2015 there will be 75 million people above 65
years of age living in Europe99
, creating increasing pressure on both working and
independent populations and health and social care systems. This significant
social issue will continue to drive potential demand, which could potentially be
met by ALT that in turn, could indirectly benefit each regional economy.
The global increase in the elderly population is one of the key factors that support
the case for funding key initiatives around ALT, not least as a result of pressure to
address significant challenges presented by a rise in the retirement age and
93
Why population aging matters: a global perspective, 2011, US National Institute on Aging
94
Later Life in the United Kingdom Factsheet, AgeUK, 2013
95
Living Beyond 100 - A report on centenarians, November 2011, Serra V, Watson J, Sinclair D
and Kneale D
96
Number of Future Centenarians, 2010, DWP
97
National Population Projections, 2010-based, ONS, 2011
98
Vision Loss in an Aging Society, 2000, American Foundation for the Blind (Crews and
Whittington)
99
Assisted Living Technology: A market and technology review, 2012

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increased life expectancy (reinforced by more effective medicines). These also
provide new opportunities for social and healthcare providers aiming to meet
increasing and different types of demand. The emergence of programmes such as
AAL are beginning to enhance the profile of this sector and are helping to attract
increasing investment and fuel market growth.
It is anticipated that the nature of demand from the ageing population is likely to
change and this shift is likely to drive a vast expansion in product portfolio and
the variety of equipment (and related services) required to meet service-user needs
(increasing customisation of product and technology development). This will be
driven by the elderly population’s increasing emphasis on preventative medicine
and healthy living (reinforced by greater social awareness and information sharing
around risk factors and wellbeing promotion).
It is important to note, however, that within the next ten years these consistently
high levels of demand, and diverse types of demand, are expected to help reduce
the cost of equipment.
Technological
Technological progress and global market trends might expand the range of ALTs
and ALSs which are in mainstream use over the next 20 years100
. There are
reportedly three major technology factors which will impact use of ALSs over the
next 20 years:
 Lower cost: more efficient equipment offering greater processing speed and
memory while consuming less power. The introduction of global standards in
global markets could significantly reduce the price of most sensors, internet
access devices and home hubs. Technological and regulatory factors of this
kind could also lead to wireless sensors with a life of at least five years100
.
 Commoditisation of broadband communication: building on the UK
government’s existing pledge to provide basic broadband for all. Factors
include the rollout of LTE-based mobile networks and fibre-based fixed
networks that will enhance widespread availability of broadband to potentially
facilitate real-time, video communication for all service users.
 Shift towards mass-market device platforms such as smartphones with
software APIs, on which independent companies can design specialist ALT
applications.
 Big Data: the transformative power of Big Data is emerging as a few
healthcare systems begin to collect and mine their data, e.g. the recent
announcements by the UK Department of Health to make some patient data
available for research. The power of Big Data in healthcare is only just
becoming apparent and is likely to have a positive impact on the effectiveness
of ALTs.
100
Assisted living technologies for older and disabled people in 2030, March 2010, Plum
Consulting

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European and Global political drivers
In order to enhance political and clinical collaboration and cooperation
internationally and accelerate the establishment of this emerging industry
(including addressing issues such as fragmentation of the supply chain)
international Government policy and support will continue to play a key role.
Given the significant economic issues presented by the non-sustainability of
current systems, the role of both political and economic strategies to fund and
facilitate the wider application of ALT and service is fundamentally important.
Evidence of the importance of this within Europe can be seen through the
establishment of initiatives that have significant government backing such as the
European Commission DG-CONNECT Ambient Assisted Living Joint
Programme101
(“AAL”) which is a scheme developed to enhance the quality of
life for the elderly through effective use of information and communication
technology.
5.3 Value Chain and Route to Market
The market for assisted living technologies and services fits closely with the
healthcare sector structure. As such it varies with the different healthcare systems
of different countries. Figure 5.1 reflects a generic view of these differing market
structures.
Figure 5.1: Overview of the value chain for assisted living technology products and
services in the UK. Source: Arup
Route to Market
In the UK elderly and disabled patients are currently able to obtain assistive
technologies and services through a combination of statutory provision, retail
markets and a hybrid combination of both statutory (including NHS and local
authorities) and private provision.
101
www.al-europe.eu
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A new framework agreement was constructed to address a revised set of needs
and a greater understanding of the market, and following an EU compliant
procurement process, the new framework agreement and its associated catalogues
were established in August 2010. This enables contracting authorities to call-off
goods and services across six different lots using standard terms and conditions.
One of the major new developments of the framework agreement was the addition
of new services such as telecoaching as well as a new lot for ‘managed services’
enabling a one-stop shop for a turnkey telehealth service.
Composition of the market
The figure below shows the number of companies by medical technology segment
in the UK - the “stars” describe market segments closely associated with ALT:
Figure 5.3: Number of UK Companies by medical technology segment. Highlighted
segments are closely associated with assisted living technologies99 Source: Deloitte
Health Solutions
5.4 Market size
In this section we consider the market size for ALT. As described earlier in this
chapter, and shown in Figure 5.2: Diagram showing Assisted Living Technology
products and services on a care continuum. Source: Arup, the definitions of
assisted living technology and telehealth and telecare overlap to some extent. A
recent report by Deloitte forecasts the global telehealth and telecare market to
grow to £14.3 billion by 2015102
. The following sections focus primarily on UK,
European, and US markets as these are likely to be the initial focus for UK
industry.
102
Primary care: Working differently – telecare and telehealth, Deloitte Health Solutions,
November 2012
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UK & Europe
Table 5.1 shows projected market growth (to 2015) for the European assisted
living technology market. The big markets for assisted living technologies in
Europe are Germany, the United Kingdom, France and Scandinavia. These are
also the larger markets for healthcare in the Europe.
Country Estimated Revenue (m)
2007 2010
Forecast Revenue (m)
2013 2015
Germany $24.7 $65.5 $120.4 $171.9
UK $20.5 $55.5 $101.6 $141.0
France $13.8 $31.8 $58.3 $85.8
Scandinavia $7.8 $31.3 $62.1 $90.9
Italy $3.8 $7.8 $12.7 $17.4
Spain $2.6 $5.7 $9.4 $12.9
BeNeLux $1.5 $2.8 $4.4 $5.8
Total $74.7 $200.4 $368.9 $525.7
Table 5.1: European markets for assistive living technologies. Source: Frost & Sullivan
2010103
The growth in the ALT market primarily depends on receptiveness towards
technology (for example by experienced community-based health professionals),
price affordability and product customisation. The market dynamics appear to be
favourable and are expected to influence a compound annual growth rate (CAGR)
of 22.6 % by 201599
. In terms of the competitive environment, a large number of
opportunities are expected to attract new entrants and support market
development.
ALT in institutions: ALT is already prevalent due to the large number of
community centres in use. Many aged people living in community centres and
social care homes enjoy the benefits of personalised and regular care. The assisted
living technologies market in institutions in Europe was valued at $115.5 million
in 2009 and is expected to grow at an average rate of 20.2 % per annum between
2010 and 201599
. Germany, the United Kingdom, France and Scandinavia are
again leaders here.
ALT in homes: The ALT market is shifting its focus towards home-based
services and care. The ALT market for residences was valued at $39.4 million in
2009. Together Germany, UK, France and Scandinavia are again a huge market
for home care assisted living (revenues in millions (market share) respectively:
$8.3 (21%), $15.8 (40%), $6.5 (16.6%), $6.0 (15.3%)). The ALT market for
residences is expected to grow at a CAGR of 28.5 % between 2009 and 2015 and
reach a market size of $177.2 million in 2015.
103
European markets for assistive living technologies, Frost & Sullivan 2010

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US market
The U.S. Census Bureau indicates that there are almost 40 million people aged
65+ (almost 13% of the population). By 2030 there will be more than 72 million
older persons making up 19% of the population. A study by Taiwan’s Industrial
Technology Research Institute predicts the US market for telecare alone (not
including telehealth) to reach $337.2 million by 2015, growing by roughly 22%
year-on-year104
.
5.5 Market and Technology Trends
Beyond the drivers set out in section 5.2 there are significant trends (within
Europe and globally) behind market growth for assisted living technology and
services, particularly within the next ten years. The report on European markets
for Assistive Living Technologies105
suggests that these trends are likely to
include:
 Market Driven Growth - Increased private participation will lead to higher
competition, and private sector investment will drive the growth instead of
government-funded projects.
 Private funding - Will rapidly increase and overtake the government funds.
 Diversification - Strong market participants will expand into other lucrative
regions, and there will be large-scale plans under execution.
 Interoperability - Equipment is likely to become globally interoperable and
will use open platform software to enhance connectivity.
 Shift in Demands - There will be a vast expansion in product portfolio and
the aged population are likely to change their demands. There will be specific
suppliers for the variety of equipment.
 Digital Communication - The ALT market is likely to adopt c.100% digital
communication and infrastructure for effective services to the elderly.
104
Forecast data from Industrial Technology Research Institute Study, 2010
105
European markets for Assistive Living Technologies, 2010, Frost and Sullivan

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Figure 5.4: Overview of ALT technology opportunities and trends105, Source: Frost &
Sullivan
These factors, together with the technological trends and drivers discussed in
section 5.2, all have significant implications for ALT and related services, in
particular by potentially driving down the cost of telecare and telehealth
equipment due to high demand. The use of robust wireless connectivity could
greatly accelerate and simplify the task of retrofitting individual homes or
community-based care facilities.
As well as reducing production costs, technological trends and supply chain shifts
will also help to make it easier to tailor ALSs to the specific needs of disabled
people. In addition, the use of mass-market platforms will help to avoid the stigma
which many old people perceive when using today's telecare and telehealth
equipment.
Today telehealth services are focussed on providing better and more cost efficient
management of common chronic conditions, using a combination of sensors, hubs
and remote servers. As the decade advances this architecture is likely to remain
broadly the same. However, in the short to medium term, new ALT developments
could improve the management of chronic conditions, extend the range of
conditions which are managed at home, and allow management while outside the
home.
In the long term, increased use of ALT is expected to enable early home diagnosis
of life threatening conditions and home monitoring of vital signs to be linked to
real-time drug administration. All of these developments will be valuable to older
citizens living independently at home.
Adoption: According to the ‘Healthcare without walls’ report92
, other countries
and health systems (notably Spain, Italy, Japan, the US - Veteran Health Affairs
and New South Wales) have developed a more strategic approach to adoption of
assisted living technologies. This has led to significantly greater levels of
adoption in some cases.
The macro-level landscape for ALT in Europe sits against a backdrop of austerity,
with governments keen to adopt affordable, innovative and technologically
advanced alternatives to traditional solutions.
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Better visibility and collaboration: The assisted living market features a
growing trend towards enhanced visibility in the value chain, with less
fragmentation, improved collaboration between suppliers together with new
supply chain/logistics technologies and information transparency.
Internationally, an increasing number of organisations are contributing towards
stimulating more innovative technology solutions.
At the EU level, various initiatives exist, notably around FP7 (the Seventh EU
Research Framework Programme - the EU's main instrument for funding research
through to 2013) and the related Ambient Assisted Living Programme (i.e. where
technology is hidden in walls). As part of its newly announced European
Innovation Partnership, the EC’s pilot project in the field of active and healthy
ageing will be highly influential in the longer term.
Wearable skin-contact devices: At the moment, telehealth devices require user
interaction to collect daily vital signs data, but there is rapid progress towards
wearable and skin-contact devices using mobile and wireless technologies.
5.6 Regional highlights
England: According to the report “Workforce development for Assistive
Technology, Telecare and Telehealth” a range of policies and policy agendas (e.g.
personalisation, re-ablement, self-care and management, efficiencies, independent
living, extra care housing, QIPP, housing) indicate a shift in policy in England
towards the delivery of services which can offer greater control over lives,
promote enjoyment of a good quality of life which is tailored to focus on
prevention, an individual needs and low level support from social care and health
when possible.
ALTs and services are apparent in this agenda at national and local authority
level. Local authority discretion over delivery mode has resulted in a range of
approaches to service set up. Associated costs of services and equipment also vary
from free to paid-for.
While there is recognition of the importance of a supported and skilled workforce,
there is less detail on how to develop and maintain practitioners in this area. The
significant ALIP funded DALLAS programme will have important lessons for
workforce development and system design.
Scotland: Scotland differs slightly from England in that personal care is free at
the point of contact. As in England, telecare and telehealth are supported in
policy. For example, Managing Long Term Conditions (Scottish Executive 2007),
Better Health, Better Care: Action Plan (Scottish Executive 2007), Seizing the
Opportunity: Telecare Strategy 2009-2010 (Scottish Government 2008), Caring
Together: The Carers Strategy for Scotland 2010-2015.
The Scottish Centre for Telehealth and Telecare which sits within NHS 24
provides guidance, support, standards, protocols and processes to support
telehealthcare solutions.

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5.7 UK Strengths, Gaps, Opportunities and Barriers
Strengths:
The UK is one of the fastest growing markets in Europe for ALT99
, in part
because the Government already recognises the importance and advantages of
these technologies. This has resulted in significant improvements in the adoption
rate of ALT in healthcare.
The market is expected to witness a CAGR of about 21.9 % from 2010 to 2015
and to achieve revenues of $141.0 million in 2015. Comprehensive deployment of
pilot projects and government funding and the elder population growth are some
of the reasons behind this market growth. This helps place the UK at the leading
edge of the sector, addressing the challenges associated with an ageing population
through the development of the next generation of assisted living products and
services.
Scotland specifically has key strengths in this field because of its industrial and
academic base but also due to proactive government policies. Medical technology
is one of the key life sciences subsectors in Scotland with a significant company
base in this sector that spans large companies such as LifeScan Scotland to small
dynamic start-ups such as SureSensors. Scotland has also key academic strengths
in this field with specialized institutes and groups (e.g. Strathclyde Institute of
medical devices, The Institute for medical Science and Technology, The Care
Technology Research group) but also a significant research base in areas of
electronics, optoelectronics and sensors, and informatics.
Gaps in the UK supply chain:
In the UK, AL systems are invariably purchased by individual CCGs or local
authorities which fragment the supply chain and drives up price of equipment. To
counter this, there is a need for appropriate political and clinical collaboration.
Such collaboration is also needed internationally, not least since the industry
within the Europe and globally faces a common set of challenges, particularly in
relation to long term conditions and the aging population.
Part of the supply chain stalemate derives from numerous telehealth initiatives
remaining at pilot stage while suppliers’ unit costs and therefore charges remain
high. In contrast, economies of scale could be achieved if initiatives were able to
be scaled up and further advanced in key areas, thereby also helping to spread
costs more effectively in order to reduce unit costs. This could happen alongside
the 3MillionLives initiative to accelerate the pace of change.
Installation & training gap
A range of health workers could potentially fill this gap by providing;
 The assessment and device training, provided they themselves are trained in
specific telehealth skills and
 Technical installation to cover installation and configuration of the devices
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The implications of this in supply chain terms include the need for visits and
initial support to patient’s home in order to cover both technical installation and
initial training on the use of the equipment. Patients may need significant
assistance over the first few days.
Opportunities:
As seen in previous sections the drivers and market for assisted living technology
products and services create significant opportunity for UK businesses. Below we
highlight some further specific opportunities:
Technology: Technology solutions are currently still fragmented, many using
proprietary technology. Convergence and integration is beginning to happen, but
opportunities lie in using and developing on existing domestic platforms e.g.
smartphones, set-top boxes, etc.
Wider range of diseases and applications: Opportunities yet to be fully realised
for ALT in tackling a wide range of diseases, and for use people with dementia,
mental health needs, children and adults with disabilities, for expectant mothers
with high risk pregnancies, and for palliative care. There is also the possibility to
provide telehealth in different contexts other than the home for example, in
nursing homes.
Market dynamics: Where feasible, join up telehealth/telecare initiatives through
joint commissioning, exploring opportunities for common logistics and supply
chain management. Explore opportunities to share template deliverables, e.g.
commissioning models, project toolkits, pathway redesign templates, model
business cases, template service specifications
The European advantage: The many European-funded projects in the field of
ALT are designed to drive standardisation and interoperability and prove
effectiveness in several European markets. UK industry’s involvement in EU
initiatives is likely to allow UK industry easier access to European healthcare
markets (one of the largest as discussed earlier).
Barriers:
Some further key issues impacting the rate of growth for assisted living
technology products and services include:
 Standardisation and interoperability of equipment and extent to which open
platforms are utilised
 Disparity in medical regulation regimes globally (and even within Europe)
 Low awareness amongst CCGs, GPs, and their equivalents internationally, of
the proven benefits and capabilities of assisted living technologies.
UK vs US SME perspective: There may be disadvantages for UK SME’s
compared to those in the US resulting from patenting of software and methods
being perceived to be more difficult than in the US. In comparison with large
corporations with resources to focus and optimise patenting strategies, UK SMEs
have more limited resources to pursue a differentiated strategy for each of the UK,
EU and US markets.

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US SMEs (in medical devices and elsewhere) are also perceived to have an
advantage when pursuing collaborations or licensing deals with global companies
in the medical devices and Telehealth space. It is reported that the US dominance
in this space, in relation to strategic patenting, may be at the expense of key
emerging markets such as China and South Korea, which are known to be strong
in telecoms and electronics106
.
5.8 What Government is doing
The UK as a whole is one of the fastest growing markets in Europe for ALT, as
the importance and advantages of these technologies are already being recognised
increasingly by the Government.
The combined impact of comprehensive deployment of pilot projects, increased
government recognition, government funding streams and growth in the aging
population results in increased market growth and improved adoption rates of
ALT in healthcare. Some of the major government initiatives and funding
mechanisms are outlined below.
WSD and 3MillionLives: The Whole System Demonstrator (WSD) programme
was established in 2008 by the TSB and Department of Health as the world’s
largest randomised control trial for telecare and telehealth. The programme aimed
to better understand the benefits, costs and barriers to the use of telecare and
telehealth and involved over 6,000 people in England across 238 GP practices.
Outcomes are still being analysed but WSD has already shown telehealthcare
offers potential for significant reductions in bed days (14%), unplanned
admissions (20%) and A&E admissions (15%) if “delivered properly”107
. The cost
of QALY (a measure used to assess the value for money of a medical
intervention) from the WSD programme showed that the cost of telehealthcare
technologies was still an obstacle to availability. The Department of Health
“believes that to turn reductions in unplanned emergency admissions, elective
admissions, A&E visits and mortality into savings, telehealth needs to be
delivered at scale, with lower upfront costs and integrating the technology into a
service offering. It is this philosophy that is driving the 3MillionLives
initiative”108
.
3MillionLives (3ML) was established in January 2012 on the back of the WSD
findings. 3ML is a pioneering partnership established by the Department of Health
with NHS stakeholders, industry, trade bodies and third sector organisations. This
cross-industry partnership is aimed at the whole-system transformation of health
and social care through the use of telecare and telehealth technologies and
services. The Department of Health has set the ambition to use telehealth to
benefit 3 million people by 2017. The programme is currently establishing seven
‘Pathfinders’ – NHS and local authorities and CCGs – contracting with industry to
deliver benefits to 100,000 people in 2013109
.
DALLAS: Announced in May 2012, and following on from the creation of
3MillionLives, the TSB’s DALLAS programme (delivering assisted living
106
Cambridge IP Ltd, 2011
107
Whole System Demonstrator Programme, Headline Findings, DH, December 2011
108
Making Connections, 2020health, March 2013
109
3MillionLives Press Release, 14th
November 2012

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lifestyles at scale) is designed to “explore ways of using innovative products,
systems and services to create more independent lifestyles”110
. The £37 million
programme has commissioned four consortia who have added their own financial
contribution. The TSB programme is joint-funded by the National Institute for
Health Research and the Scottish Government. The four initiatives that make up
the project will create several communities, working with existing statutory health
care provision and will demonstrate how innovative technologies and services can
be used to enable nearly 170,000 people to live independently and to expect a
better future. Outcomes are expected by 2015.
Other Technology Strategy Board programmes:
 Assisted Living Platform Special Interest Group
 Smart Awards (previously Grants for R&D)
 Small Business Research Initiative (SBRI)
 Collaborative R&D is designed to assist the industrial and research
communities to work together on R&D projects in strategically important
areas of science, engineering and technology - from which successful new
products, processes and services can emerge.
The scope of the collaborative R&D competitions has recently been expanded to
support large collaborative R&D projects and smaller projects approved within
faster timescales. These may vary with specific competitions and funding limits
are specified by individual competitions but generally include:
 Feasibility studies - small projects lasting for a maximum of one year and
often less than £100k; up to 75% funding
 Fast-track projects - projects lasting no longer than 18 months and having a
maximum total cost of up to around £200k; up to 50% funding
 Larger Collaborative R&D projects – projects of around a few £100k to £m’s
to last up to five years; funding mainly for applied R&D; up to 50% funding.
The National Institute for Health Research (NIHR): The NIHR commission
and fund NHS, social care and public health research that is essential for
delivering their responsibilities in public, health and personal social services. For
example the i4i Programme is an NIHR research programme that provides
investment in, and improved identification of, promising healthcare technologies
in order to accelerate the development of new healthcare products for the 21st
century. It also funds translational research, extending between basic research and
pre-clinical trials or health technology assessments.
110
TSB Press Release, 23 May 2012

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Other initiatives:
Several other public and NGO bodies are funding research programmes in the
UK, including:
 Research councils through their general academic research funding, but also
both EPSRC and ESRC are involved in the TSB’s ALIP programme.
 The Wellcome Trust supports new health innovation, working with the
Department of Health.
 The NHS National Technology Adoption Centre has looked at models around
remote monitoring for heart failure.
5.9 Recommendations
The development of AL products and services should fit into an integrated care
package, demanding genuine health-social care integration, rather than regarding
ALT products and services as stand-alone. The government’s 3MillionLives
programme is a major step forward, and will foster growth in the UK marketplace.
Recommendations for government
The UK Government should aim to further support the growth of the assisted
living market in the UK for the benefit of existing and emerging UK companies
(including equipment, technology and service providers), by:
 Working to develop a solid market in the UK for assisted living services to
increase uptake and help drive down costs – 3MillionLives is a step in the
right direction, though perhaps more can be done sooner.
 Amending tariffs and incentivisation schemes to recognise and reward ALT-
enabled services on a consistent basis across the NHS, based on applicable
outcome measures92
.
 Continuing to provide evident policy commitment, leadership and guidance
for ALT and its integration into care plans and pathways which interoperate
across all healthcare sectors. This should build on the results of the major
pilots results arising from 3MillionLives.
 Working to further “whole-system thinking” across wider sectors such as
electricity, water, and transport. This has the potential to deliver further
meaningful improvements to the quality of life of those who benefit from
ALTs.
Recommendations for UK Industry
Individual businesses in this sector should aim to form collaborative partnerships,
enhancing the international competitiveness of the UK in this market. This is
especially the case if challenges around pricing and standards in particular can be
addressed.

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Specific industry recommendations include:
Collaborate:
 Industry players need to develop or collaborate to become capable of
providing cost effective end-to-end system and service solutions to match the
emergent commissioning requirements (including taking account of the
establishment of CCGs)92
.
Innovate business models:
 Adopt innovative commercial approaches to large scale delivery to achieve in-
year benefits for the NHS through collaborative partnerships92
.
 Develop a pricing model applicable to a consumer market – especially
applicable to overseas markets where health systems are less structured. The
global consumer market for assisted living technologies has strong growth
potential with 1 billion people aged 65 years or older by 203093
.
Innovate product and technology:
 Continue to integrate products and solutions, whilst specialising services for
the different classes of end users; technology solutions currently are still
fragmented and diverse, these will need to become more integrated at the
location of care and fit for purpose. Convergence around interoperable
platforms or better integrated platforms is fundamental to successful uptake.
 Capitalise on UK’s world-leading skills and expertise around life sciences,
bioengineering, service design and product design to deliver innovative
products and services faster. Embrace the opportunity to address different
diseases through different technology approaches more appropriate for lower
cost, higher volume services.